President Barack Obama told a joint session of Congress earlier this week that his administration has a plan to prevent mortgage foreclosures for millions of Americans. In fact, the Department of Housing and Urban Development proudly says that it is shoveling money out the door as fast as it can.
Yesterday, researchers at the University of Virginia took an in-depth look at just where foreclosures are happening. It turns out that 87 percent of foreclosures housing value loss is taking place in just four states–California, Florida, Arizona and Nevada. According the press release describing the study:
National housing price declines and foreclosures have not been as severe as some analyses have indicated, and they are not as important as financial manipulations in bringing on the global recession, according to a new analysis of foreclosures in 50 states, 35 metropolitan areas and 236 counties by University of Virginia professor William Lucy and graduate student Jeff Herlitz.
Their 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.
It should be noted that the current average national foreclosure rate of 0.79 percent is about double the rate it was in 2000. What about the effect of foreclosures on the balance sheets of American banks?
Potential losses in housing values from 2008 foreclosures in all 50 states — if values decline to 2000 levels — were less than one-third of the $350 billion provided to banks and insurance companies to cope with losses in mortgage-backed securities, Lucy and Herlitz estimated.
*not "foreclosures" as originally headlined. Nevada, California, Arizona, and Florida do rank numbers 1, 2, 3, and 4 in foreclosure activity. All together the four states account for 55 percent of national foreclosure activity.
