Tuesday, March 3, 2009

Most Foreclosures Limited to Four States

The facts versus the fearmongers.

A University of Virginia professor William Lucy and graduate student Jeff Herlitz analysis shows that most foreclosures have been concentrated in California, Florida, Nevada, Arizona and a modest number of metropolitan counties in other states. In fact, they claim that "66 percent of potential housing value losses in 2008 and subsequent years may be in California, with another 21 percent in Florida, Nevada and Arizona, for a total of 87 percent of national declines."

"California had only 10 percent of the nation's housing units, but it had 34 percent of foreclosures in 2008," Lucy and Herlitz reported. California was vulnerable to foreclosures because the median value of owner-occupied housing in 2007 was 8.3 times the median family income, while the 2007 national average was only 3.2 times higher than median family income (and in 2000, it was lower still at 2.4).

Across the country, the run-up in housing prices from 2000 to the national peak in 2006 has contributed to a 10-months' supply of houses for sale, nearly six months more than the norm from 1998 through 2005, they concluded. But most of the excess supply is either foreclosed properties for sale in declining areas — which constituted 45 percent of total sales in some months of 2008 — or "opportunity" sale offerings by owners seeking to take profits on the price escalation of previous years, which often happens when the price of existing homes rise appreciably. Only a small portion of the excess supply is from current construction of new houses, they said.

Given the current Fed money printing, this is the first interesting piece of data that suggests that not only will the overall economy rebound quicker than expected, but the housing market might also.

At the epicenter of big government, the Washington, D.C. metropolitan area, prices have barely changed, according to the study.

1 comment:

  1. Yes, it is amazing how the media will assume that pain in one location is happening everywhere. My local news in Houston has given lots of coverage to foreclosure auctions and dramatizes a handful of condo foreclosures. But, when you look at the data from RealtyTrac, the number of foreclosures in Texas has been rapidly declining over the last 3 years. Falling by 30-40%. Yet, everyone around me continues to believe the foreclosure around here are rampant.