Foreclosures: The Worst Markets Still Suffer

RealtyTrac’s foreclosure report for the first half of this year contains mostly bad news. The worst of it came from the states that already have suffered the most. And, based on the data, that is not likely to change soon.

The new report shows:

RealtyTrac released its Midyear 2012 Foreclosure Market Report, which shows a total of 1,045,801 U.S. properties with foreclosure filings — default notices, auction sale notices and bank repossessions — in the first half of 2012, a 2 percent increase from the previous six months but still down 11 percent from the first half of 2011.

The half-over-half increase was the first in more than two years. RealtyTrac’s CEO Brandon Moore said he is worried the trend will continue.

… foreclosure starts began boiling over in more markets in the first half of the year, particularly in the second quarter, when rising foreclosure starts spread from primarily judicial foreclosure states in the first quarter to more than half of all non-judicial foreclosure states in the second quarter.

At the top of the list of damaged housing markets were the same states that have been there since the housing market downturn: Nevada, Arizona, Georgia, Florida and California. The mix of overbuilding and high unemployment will continue to keep pressure on those markets. Remarkably, one in 57 homes in Nevada were in foreclosure in the first half of the year. This was followed by Arizona, where the number was one in 58. RealtyTrac defines homes in foreclosure as properties with filings, including default notices, auction sale notices and bank repossessions.

All housing problems are local, the RealtyTrac data show again. And the problem must be addressed on a local level. Some portions of the financially wealthiest areas of the United States have very low foreclosure rates, which extend back to the drop that began in 2007. The need for delinquency aid in these regions is modest at most. They do not suffer the blight of foreclosures, which, among other things, drag down the prices of houses in the same neighborhoods as homes deserted by their owners, or where the owners will soon be forced out. This drop in prices robs mortgage holders of whatever equity they might have in their homes, which in turn makes them more likely to stop paying on underwater loans.

National figures show that federal programs to slow the foreclosure floods have been ineffective. That may be because these programs do not work well in the hardest hit areas, at least as far as the RealtyTrac data demonstrate. If these plans do not have an impact in the bad areas, it is hard to imagine how they will work in areas where the problem is not as acute.

Douglas A. McIntyre