How Did Your State Rate in Foreclosures of 2007?

By Anastacia Mott Austin

Unless you’ve been living under a rock for the past year or so, you are already aware of the dismal real estate picture in the United States.

Come to think of it, some of us may need to resort to living under a rock once our mortgages fold.

Real estate tracking company RealtyTrac issued a state-by-state report this week, detailing the rates of foreclosures for each state, as well as for the country overall.

It’s not good.

Foreclosures across the country increased by 75 percent over last year, says RealtyTrac, with more than one percent of all homes in America facing some kind of foreclosure. Some states fared much worse than that.

Homeowners in Nevada faced the toughest real estate market, with 3.4 percent of all homes in some stage of foreclosure—three and a half times the national average.

Gail Burks, the CEO for the Nevada Fair Housing Center, which helps troubled homeowners, told reporters that in some areas of Nevada as many as 40% of homes are facing foreclosure. "It's having a huge impact," said Burks. "Some zip codes here are recording 22 foreclosures a month."

Florida followed in second place, with about 2 percent of all homeowners foreclosing, and Michigan had 1.9 percent.

California led with the highest number of total foreclosures at 481,392, more than one percent of all homeowners in the state and a 682% increase over the year before.

The report included all properties that had received one or more of the following: a warning notice of foreclosure, default notices, repossession or auction notices, or any property in some stage of foreclosure filing. Some homes had more than one mortgage, so the number of foreclosures outpaces the number of actual homes in trouble.

Filings increased especially during the last three months of 2007, which means that the foreclosure rates are not expected to get better in the early part of 2008. Rick Sharga, vice president of marketing for the Los Angeles-based RealtyTrac, told reporters, "It does appear that we're seeing a new batch of properties enter the process." Sharga added that most of the foreclosures of the riskiest loans will have played themselves out by June, so the picture may brighten some by the end of this year.

However, more than 1.8 million homes with subprime mortgages are due to reset to higher rates this year, so that number may change.

Falling home price rates are blamed for the upsurge in foreclosures, as homeowners with risky loans were no longer able to refinance into better loans as their equity tanked.

Equally at fault are the millions of risky jumbo and subprime loans given out over the last couple of years, with promises of initial low adjustable rates to home buyers who otherwise would not have qualified for loans. People were told to refinance before their rates went up, and when the market soured they found themselves unable to do that.

Another report released this week echoes the findings from RealtyTrac. First American Core Logic released a study in which 381 metropolitan areas were assessed for risk of home foreclosures. The company takes into account the economy of the area, job losses or gains, and property values. First American estimated that home sale prices may continue to drop and foreclosure rates rise for as long as 18 more months – or longer.

The risk is especially high in outlying areas that were initially attractive to commuters in metropolitan areas when home prices were too high in the cities. Once home sale prices dropped in those areas, the outlying areas became less attractive to buyers, and thus those areas face disproportionate losses as a result.

Is there any good news in all of this? It’s great news….for renters. Investors in the housing market are not able to sell their homes, so they are forced to rent them out instead. Competition is high, so rental prices are decreasing.

For owners, help is supposedly on the way. The Federal Reserve cut the interest rate for the federal fund by three-fourths of a percent last week. In addition, indices for ARM rate resets have also dropped, which will make the increased payments not quite as sharp. But the difference it makes in overall payments just won’t be enough, say experts. Doug Duncan, the Mortgage Bankers Association’s chief economist, told the press, "Any increment downward helps, but it won't be a huge plus."

Lenders have been getting pressure from the government and from consumer rights’ groups to help out, and some are trying to work with borrowers.

Unfortunately, despite help from lenders and the feds, homeowners whose loans are due to reset this year are still in for a big jump in their payments no matter what. And without the ability to pull equity from their homes, it may be the last straw for some.

The top ten states in foreclosures for 2007 were Nevada, Florida, Michigan, California, Colorado, Ohio, Georgia, Arizona, Illinois and Indiana.

States not experiencing much of a downturn in the real estate market were South Dakota, Vermont, Maine, West Virginia, and North Dakota.