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Majority of Foreclosures are Concentrated in Five States

From the way Barack Obama talks, you would think foreclosures and declining housing values are taking place all over the country. That's not entirely true. It turns out that the majority of all home foreclosures are taking place in just five states: California, Nevada, Arizona, Florida, and Michigan. So it's not quite the national problem we were told it was. The Cato Institute's Alan Reynolds offers some comparative analysis at the New York Post:

It turns out that the five states with by far the highest foreclosure rates have some things in common with each other, but very little in common with most other states.

I studied the latest available figures for state foreclosure rates, changes in home prices over one and five years, existing home sales, the percentage of mortgages that are underwater, and unemployment. Then I compared figures for the five most foreclosure-prone states with New York and also with the 25th-ranking (median) state.

One out of 76 homes in Nevada went into foreclosure in January, for example, compared with one out of 173 in California, with Arizona and Florida close behind. In New York, by contrast, only 1 out of 2,271 homes went into foreclosure.

Nationwide, foreclosures fell 10% in January, to one out of every 466 homes. But that is a "mean" average dominated by places like California and Florida. In the median state with the 25th highest foreclosure rate, by contrast, only one out of 949 homes was in foreclosure - just one-tenth of 1%. Foreclosure rates were even lower in 25 other states. In Vermont, foreclosures amounted to just one out of 51,906 homes. Foreclosure can be a personal crisis, but it is not a national crisis.

Mr. Reynolds' analysis shows that the declining home values are concentrated in those same states, minus Michigan. Another report confirms Reynold's findings and says that California, Nevada, Arizona, and Florida account for 87% of home value losses. Interestingly, Reynolds also notes that those same four states are experiencing the largest increase in existing home sales, bringing him to the conclusion that dropping home prices are not the problem but are actually the solution. Why? Because it shows that the free market is working. People are buying the homes that have fallen the most in price, reducing the inventory of homes for sale in those states. This is a good thing.

However, Obama's mortgage relief program could make the housing situation worse than if we just let the market handle it. How? My evidence is purely anecdotal, but I wouldn't be surprised if it's happening in other places. My husband is a bankruptcy attorney, and he has received phone calls from people who have told him that mortgage brokers advised them to stop paying their mortgages if they can't refinance their homes because their home values have dropped below their mortgages values. This, the mortgage brokers have told these home owners, would allow them to qualify for Obama's mortgage relief program. These are home owners who are currently paying their mortgages. My husband is just one attorney in one city, so I wonder if mortgage brokers in other cities and states are advising home owners to do the same thing. If this is happening in other places, the number of people in default could increase simply because Obama's program encourages those who are struggling but are paying their mortgages each month to stop paying. Of course, my husband has advised those home owners who have called him to continue paying their mortgages because if they stopped even for a short time they would be in default and the bank would begin foreclosure proceedings. Even if they did qualify for assistance, they could lose their homes before they could get any help.

Obama's mortgage relief program is an example of Ronald Reagan's brilliant statement: "Government is not a solution to our problem. Government is the problem."


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Comments (34)

You get more of behavior yo... (Below threshold)

You get more of behavior you subsidize - whether it's good or bad.

Nice to read someone blow o... (Below threshold)

Nice to read someone blow off and minimize the pain of others whose husband makes his income from that pain. Any irony there?

Poorly put as usual JFO. N... (Below threshold)

Poorly put as usual JFO. No need for you to exceed your standards.

Naturally it begs the quest... (Below threshold)

Naturally it begs the question...why are these states "hardest hit" in foreclosures? They are certainly hardest hit in illegal populations. Is there any connection here? Or is it pure coincidence. Somehow I don't see CNN tackling the question any time soon.

Actually OLDPUPPY, I think ... (Below threshold)

Actually OLDPUPPY, I think the answer may be more related to (except in Michigan) the higher instance of investment properties. I'd like to see foreclosure data focused on 2nd home and investment properties.

JFO - From the po... (Below threshold)


From the post...

"These are home owners who are currently paying their mortgages. My husband is just one attorney in one city, so I wonder if mortgage brokers in other cities and states are advising home owners to do the same thing. If this is happening in other places, the number of people in default could increase simply because Obama's program encourages those who are struggling but are paying their mortgages each month to stop paying. Of course, my husband has advised those home owners who have called him to continue paying their mortgages because if they stopped even for a short time they would be in default and the bank would begin foreclosure proceedings."

Sounds like the best advice he could give them to ME, JFO. Note they can PAY the mortgage, they just don't want to! Being underwater in your mortgage doesn't absolve you of the responsibility to live up to your contract.

Blowing off the mortgage will lead to foreclosure proceedings. Even if they DON'T lose the house, Obama's heroic rescue package will only save them AFTER they've buggered their credit rating. So they're doubly screwed - not only is their house going to be worth less (though it will recover eventually) their credit will harmed. (Though arguably less than a bankrupcy. It's kind of like asking which you'd rather be whapped with by a gorilla - a wooden baseball bat or a turned-down 2x4.)

So what should he tell them? "Go ahead! Screw yourselves over for some program which MAY or MAY NOT actually come into being and that you MAY or MAY NOT qualify for! And keep my number handy, because if you're stupid enough to do this, I'd like to be first on your list when you really need a BK lawyer!"?

He's a bankrupcy lawyer - and he's giving them advice that will likely keep them OUT of his office. How is THAT being anything other than ethically responsible?

Hey JFO -It's cal... (Below threshold)
John Galt:

Hey JFO -

It's called a "job"! And sometimes people have to work and graduate from a thing called "college" in order to get these things. Typically people are required to do a thing called "study" to get these jobs. And in some cases these "jobs" require people to pass what's called a "test" even to be considered for these things. People who work hard or strive or achieve for them sometimes make what's called a "career". Have you heard of the words "achieve" or "strive"? Typically hard work + dedication + time = "careers" or "work". How about that for irony!

JFO you're an IDIOT!! And stop feeling sorry for these people! You're not helping them "strive" or "achieve" by feeling pity for them.

Wow Lawson, I wasn't talkin... (Below threshold)

Wow Lawson, I wasn't talking about the husband or his advice. I was talking about the author of the post who, with absolutely no evidence whatsoever, minimizes what is clearly a national problem and repeats the worn out bromide of less government. Meanwhile she's supported by a man who makes his living WHEN people reach a point where bankruptcy may be their only answer. I call that ironic.

Given the rush to implement... (Below threshold)

Given the rush to implement "The Plan" because of the national EMERGENCY, I have no doubt that the law of unintended consequences will rear it's ugly head at the most inopportune moments.
Even our Savior has said "It's not perfect".

I've got a news flash for The Chosen One: When people are in dire straights, they tend to act in their own self-interests. Singing "Kumbaya" won't cut it.

I'm sorry JFO, but how is a... (Below threshold)

I'm sorry JFO, but how is actual foreclosure data, as written and linked in the article, "absolutely no evidence whatsoever"? Do you read? Are you saying they are made up numbers?

Question authority!!... (Below threshold)

Question authority!!

Have some balls !!

Someone needs too! The press certainly doesn't

For you Capitalists out the... (Below threshold)

For you Capitalists out there, here's a new Bumper Sticker:

Question O-thority.

No evidence, JFO? Read the... (Below threshold)

No evidence, JFO? Read the article. California and Nevada, the two states hardest hit, may believe they're the entire country... but they're not. There are 5 states that have the majority of the foreclosures.

The national median is 1 in 949 houses in forclosure, and 14.7% underwater to some degree. New York has 1 in 2,271, Vermont has 1 in 51,906. Been looking for an easy link to someplace with that info.

Are things sucky in CA and NV? Sure... but if you got a mortgage when you thought your house was worth $900k, and now you think it's worth $700k - YOU are still responsible for paying it. If you CAN'T pay it, due to layoff or sickness, that's another matter - but I don't see it's appropriate for the government to help out if it's simply worth less than you paid for it.

Socialism Sucks:Th... (Below threshold)

Socialism Sucks:

They're not made up numbers. She just cherry picked the top 5. She left out Ohio, Texas, New Jersey, Illinois, and Georgia.

She left out the fact that foreclosures increased 80% nationwide in 2008.

That's just for starters.

No matter how you wrap the ... (Below threshold)

No matter how you wrap the bow, it is still rewarding people for irresponsible behavior and/or not knowing how to prioritize. ww

JFO -From your lin... (Below threshold)


From your link -

In 2008 California, Florida, and Arizona had the highest foreclosure totals

More than half a million California properties received a foreclosure filing in 2008; the highest state total nationwide. Foreclosure activity in California increased over 100% from 2007 and nearly 500% from 2006.

With over 360,000 properties filing a foreclosure in 2008, Florida was the second highest state total. Florida's foreclosure activity increased over 130% from 2007 and well over 400% from 2006.

With over 103,000 properties filing a foreclosure in 2008, Arizona was the third highest among the states. Foreclosure activity in Arizona increased more than 200% from 2007 and well over 600% from 2006.

Other states in the top 10 of foreclosures for 2008 were Ohio, Michigan, Illinois, Texas, Georgia, Nevada, and New Jersey.
Georgia has a 1 in 400 rate, and it's slowing. And things are getting better in Texas.
According to Gaines, the number of foreclosure filings in Texas has actually decreased since mid-2007, and ranks 24th among states in terms of total foreclosures. Gaines said that latter number is a little misleading, as Texas runs higher in total foreclosures even in good years. He compared the state's rate of homes facing foreclosure action, about one percent of mortgaged homes, with other states, like California and Nevada, where foreclosure rates are running at around 4 percent. The foreclosure rate for subprime mortgages in Texas, said Gaines, is about 6 percent, half of the national rate.
Maybe the same argument should be made for forclosure 'stimulus' as is made for AGW. Ignore contrary evidence as 'local weather conditions' and tout what pushes the agenda as 'incontrovertable proof'.

Is there a problem with foreclosures? Yeah - in some states. Not generally. There will ALWAYS be foreclosures, people who don't pay for whatever reason. Doesn't mean the problem doesn't need to be addressed, but leveling the financial house to clean the trash out of a couple of rooms seems rather counterproductive.

BTW, the 80% increase numbe... (Below threshold)

BTW, the 80% increase number is essentially worthless without context on the numbers, JFO.

If a city of 40,000 you're has 10 foreclosures one year, and the next has 18 - you're looking at an 80% increase. If there's 20, then they can report foreclosures doubled! PANIC!!!!! Or not - because you don't know the total numbers involved.

Context IS important, especially when money is involved!

You're talking about the fi... (Below threshold)

You're talking about the financial sector bailout, right Willie?

ww,i agree with you.... (Below threshold)

i agree with you. big problem in this country is the constant rewarding of bad behavior. you see it in all walks of life. i work in accounting and what i see makes me sick. bosses who screw up royally, get sympathy and a big fat bonus to boot to soothe their egos. i'm saving my sympathy for people who lost their jobs, trying their best to handle things, get sick...etc....not for the dead-beats and lowlifes who knowingly think others should take care of them.

A point that I haven't seen... (Below threshold)

A point that I haven't seen made is that while the foreclosures may be heaviest in 5 states, the financial institutions that hold the bad paper are national.

You may live in Vermont with a low foreclosure rate, but if CityBank, BofA, Morgan/Chase, etc. bought up your local bank, the problem now becomes local for you.

Rance:Only if you ... (Below threshold)


Only if you failed to support your local Credit Union.

mag: you're talking about i... (Below threshold)

mag: you're talking about investment bankers, right?

epador,If you want... (Below threshold)


If you want to get a small business loan, will your credit union handle it? Mine won't.

Variant on the TNGOP sticke... (Below threshold)

Variant on the TNGOP sticker:

Why not "HONK if you're pay... (Below threshold)

Why not "HONK if you're paying for Ben Bernanke and Tim Geithner's friends' bonuses"?

Disagreed with it then, dis... (Below threshold)

Disagreed with it then, disagreed with it now, however Obama now owns it.

...and as always Government... (Below threshold)

...and as always Government sticks it's head where it doesn't belong. The fact that foreclosures are concentrated in a few "boom" pockets goes further to proof that FREE MARKET needs to do its thing not the Government. Within the "boom" areas prices doubled, in some cases tripled within a very short span of time. What do you expect? Sure s*@t is going to hit the fan. I just refuse get smacked with more and more taxes. Nobama and his crooked posy need to worry more about providing an environment for entrepreneurship and less about being entrepreneurs themselves.

mag, anyone who does what i... (Below threshold)

mag, anyone who does what is right to be responsible and hard working knowing there is no free lunch and by economical hardship find themselves hurting, I am very much for helping them out. I always believed in community helping their neighbors.

Why should my wife and I continue to work if we would get free healthcare, mortgage help, food, and a stipend from the government? Where has the incentive gone to work hard to be comfortable? Why all of a sudden do people who do not contribute DEMAND things? This stimulus is a teaching package, but the wrong lesson. ww

Willie, if I were you, I wo... (Below threshold)

Willie, if I were you, I would call my representatives and demand that they stop giving my money to bankers who are profoundly sucktacular at banking. There's welfare, and then there's corporate welfare, which is much worse--someone who has an MBA and demands money from the government is an asshole.

Hyper, you have no chance t... (Below threshold)

Hyper, you have no chance to be me.

Why are you thinking I was for the banking bailout? Even though the bankers were somewhat forced to give out risky loans, they did abuse the priviledge.

Why did the democratic leadership lead by Pelosi and Reid, who have been leading congress going on three years NOT have any oversight of the banking system? How can they let that happen? ww

With regard to Michigan, th... (Below threshold)
Mikey NTH:

With regard to Michigan, the ill-health of the auto industry would be a factor, but Michigan is also a vacation state, with a lot of summer homes "Up North". For the past few years I have seen a lot of For Sale signs around the lake where my parents summer. I suspect a lot of those places were bought/built with overtime pay, and since that has gone away, those purchasers have been in a bind, trying to pay two mortgages without that extra income.

I wonder how many of Michigan's foreclosures are actually the foreclosures of second homes?

With respect to Florida, the real estate market there took a dive in 2003 (IIRC). My parents had a small condo on Anna Maria Island and sold it then, moving to a larger (but less expensive) condo in Bradenton. They sold the island place right quick and got what they wanted, but the new owner tried to flip it, and it sat on the market for sometime before it was sold, for less than what my parents sold it for.

Anecdotal evidence, for sure, but I think a real estate bubble (speculating on real estate prices) finaly burst back then, and the collapse has really hit home this year.

BTW - if you are underwater... (Below threshold)
Mikey NTH:

BTW - if you are underwater on a mortgage but can still pay it, then by all means pay it and sit tight. Use the house for living in and over time real estate values will move up again. In other words, stay put (if possible) for as long as you can. And if you are in the market to buy a place, buy less than you can afford. You will want the cushion.

Yeah, Florida has been hit ... (Below threshold)

Yeah, Florida has been hit hard. The additional slap in the face is that the lower home values in our county are not reflected on our property tax bills.

Just remember the debts don... (Below threshold)
Bush Depression:

Just remember the debts don't matter, war loving, debt creating, incompetent administration that will forever be remembered as the cause of the

Great Bush Depression (GBD)






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