Eighty Seven Percent of Housing Value Loss* in Just Four States

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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.

california foreclosure

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.

See more of the UVA findings here

*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. 

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  1. Damn! Sounds like a great time to score some property in Nevada on the cheap and I’m broke! Oh well, looks like this shit’s gonna last a good while so there may still be an opportunity.

    1. Foreclosure can happen when you fall behind on your monthly mortgage payments. It’s important to keep the lines of communication open between you and your lender to prevent foreclosure on your home if you are unable to make your mortgage payment.

  2. “Eigthy Seven”, Ron?

    1. This is definitely a topic that’s close to me so I’m happy that you wrote about it. I’m also happy that you did the subject some justice. Not only do you know a great deal about it, you know how to present in a way that people will want to read more. I’m so happy to know someone like you exists on the web.

  3. Kyle Jordan,

    This is a time for HOPE not your pessimism. You can’t buy a home on the cheap if you get sent to a re-education camp for non-believers such as yourself.

  4. Episiarch: I caught it, but too late before the relentless army of reason.com spellcheckers got me. Keep up the good work and thanks. 😉

  5. I wonder if it has anything to do with local governments pumping money into swanky condos and funneling money to developers to make houses rise out of the swamps? Is that too Orlando-specific?

  6. The good news is that due to fortunate boundary and geographical configurations, it will be easy to “saw off” these states and establish new beachfront property lots, which should actually be stimulatory.

    Sounds like a job for our tactical nuclear warhead inventory. Sorry ProL.

  7. .79%? .79%! All of this chaos for .79%?

    Jesus Chrysler

  8. “This is a time for HOPE not your pessimism. You can’t buy a home on the cheap if you get sent to a re-education camp for non-believers such as yourself.”

    You’re right my dear Naga. I don’t need the re-education camp though. I’ve already given up. Oh well, we all eventually die at least.

  9. National housing price declines and foreclosures have not been as severe as some analyses have indicated

    Don’t you get it? The sky is falling.

    We’re in a DEPRESSION, here!

  10. No problem, Ron. Pedantically nitpicking at reason contributors makes my day.

  11. Okay, the headline changed, but how about the article. Is the 87% percent foreclosures or housing value lost?

    It seems the latter, but the second paragraph still says foreclosures.

  12. Save Florida!

  13. Kyle Jordan,

    There you go again with that pessimism! Dude, you are cruising for a bruising from Obama’s goon squads. Personally, I’m waiting for medical technology to catch up with me and make me into a god-like being. HOPE damn you!

  14. Yo! Fuck Florida!

    Inspired by Xeones

  15. .79%? .79%! All of this chaos for .79%?

    It’s scamtastic, dudes.

  16. “Personally, I’m waiting for medical technology to catch up with me and make me into a god-like being.”

    Now THAT’S something I can hope for! Roam the Universe consuming planets, Galactus style.

  17. There are no weapons of mass destruction. There is no economic crisis. There is no hope and change.

  18. Roam the Universe consuming planets, Galactus style.

    No, not another BSG thread-jack!!!

  19. Kyle J.,

    That’s better. Just wait till the great price wars between rocket cars and jet packs!

  20. Fuck BSG! I’m talking something good.

    Comic books baby!

  21. Ronald,

    The footnote is more clear now but you probably still need to edit paragraph 2.

  22. When the Silver Surfer comes to appraise your planet, it’s always bad news.

  23. No, not another BSG thread-jack!!!

    Either you have no clue what you’re talking about, or that was a The Office level snark joke.

  24. P Brooks,

    Can’t we just have Jessica Alba pull her feminine wiles on the surfer dude? It worked before unless I have totally disconnected from reality.

  25. “It turns out that 87 percent of foreclosures are taking place in just four states–California, Florida, Arizona and Nevada. ”

    And just by the sheerest coincidence, those states are where all the “responsible” homeowners happen to be.

    Becuase Obama is only going to bail out the “responsible” homeowners with our tax money, don’t you know.

  26. Cue LoneWacko to show up now and discuss how the mexicanhordes are gonna pull some sort of reconquista unless we bail out the “homeowners”.

  27. Cue LoneWacko to show up now and discuss how the mexicanhordes are gonna pull some sort of reconquista unless we bail out the “homeowners”.

    …which can only be halted if ReasonMagazine would ask CertainQuestions and post the responses on Youtube.

  28. Frankly, if Mexico would take California back, i’d throw in the other three for free.

  29. Xeones, you clown! We’re America, dammit! We take territory, we don’t give it away!

  30. I would love to have given the Republicna Response the other night. One line “in Obama’s America, the responsible and the hard working work to support the irresponsible and politically powerful. It is time we stopped believing in government, stopped believing in cults of personality and started believing in ourselves.”

  31. Wrong word tense.

    We WERE America.

  32. “One line “in Obama’s America, the responsible and the hard working work to support the irresponsible and politically powerful. It is time we stopped believing in government, stopped believing in cults of personality and started believing in ourselves.”

    Obama is rushing to get to the tipping point where more than half the population is on the dole in one way or another.

    Then it’s all over.

  33. Did someone say BSG?

    Don’t deny it; I heard it.

  34. Save Florida!

    Maybe, but you’re going to have to throw in some cash, or at least the Caribbean.

  35. Look on the bright side; when the next wave of Okies gets to California, they will be able to find plentiful and affordable housing.

    Right?

  36. Jesus Chrysler

    Hey, I own the rights to that phrase. Now cough up some royalties. Punk. 🙂

  37. when the next wave of Okies gets to California

    As the Big War ditty used to go…..

    Said the Okie to the Arkie
    Let us go and fight Japan
    We took California
    And never lost a Man

  38. A sequel to “The Grapes of Wraith”? Teh AWESome!!!

  39. TWC,

    BTW, Bink Pinot Noir, 2004 vintage, Weir Vinyards. I can’t get my hands on any thanks to some douchbag buying 3, count em’, 3 cases of it. The damn state is out now. Make it happen.

  40. TWC, fair enough. But I call dibs on “Jesus H Mother Mary of Christ Our God, Dude”

  41. Back in the day, when mortgage-backed securities were being invented (and I know, because I worked on them), we had severe restrictions on the number of mortgages you could include from a half-dozen or so states.

    If memory serves, all four of those states were on the list. 20 years ago. So its not like nobody could have seen this coming. We did, 20 years ago.

    Plus ca change. . .

  42. Yes John. Obama started the current age of personality cults. Republicans sure do hate cults of personality.

  43. Would also be interesting to see how many of those properties in foreclosure are PRIMARY residences. Those states are exactly where speculation was rampant by “investors” borrowing from the false equity of their primary residences and subsequent investment purchases to aquire several properties. Hmmmm…

  44. robc: Thanks. Fixed.

  45. Ron – you cited a September 2008 document for the “current” foreclosure rate. Do you have a source that provides a little more recent information? Thanks.

  46. The value lost was completely an illusion in the first place. Homes in Sacramento were going for $1 million that would go for $200k in Dallas at the height of the housing bubble. Sacramento is hole for the love of god! Why would anyone think it would be a good idea to prop up these prices?

  47. Bill Mahr on Real Time stated that the average house price in Detroit has dropped to $18,000. First off, I question using the statistic of ‘average’ price. But anyhoo, even if the crisis in Detroit is reaching these levels, is there a better definition of low-income housing?

  48. So, the average car in Detroit costs more than the average house?

    It says so, so much about Detroit, no?

  49. Thank god I live in Atlanta since obviously we haven’t been severely affected by the housing collapse. After all, our market is only down 30% from this time last year. and we’re still at 125% of the value from 2000.

    Ronald, you’re missing the point, the problem didn’t reach critical mass until the last quarter of 2008, quoting a value that was either just before or just at the start of this debacle is like saying US casualties in 1941 was lower than the casualties we sustained in world war one, so really, World War II wasn’t a major conflict.

  50. The financial chaos isn’t caused by falling house prices, its caused by rising uncertainty and falling confidence in the system. In the back of their minds, everyone knows that these assets have value, but nobody is willing to set a price floor as long as governments are prepared to shovel money into the cavern. In the end, there will be a few people that get really rich when we realize that these aren’t worthless, falling apart homes under water in New Orleans, they are actual abodes with real value. Alot of imaginary money will in a short period disappear, but it’s probably alot less than what people think. IN other words, we’re making it worse by obfusticating the real value with what we “want” the values to be.

  51. Ronald, you’re missing the point, the problem didn’t reach critical mass until the last quarter of 2008,

    The knock-on effects in the financial markets didn’t reach critical mass until then, true. I haven’t seen anything indicating that foreclosures spiked since then. Would be interesting to know, though.

  52. 87% down? Not in MY neighborhood. They haven’t lost alot of value here at all, just selling alot slower than usual. There are just some over-developed newer towns where the homes are being foreclosed losing value. And most of those people probably have no equity in the home…they are the people who should never have qualified for a mortgage in the first place!

    And now we have people from China coming in and buying depressed properties. How ironic that what will put a bottom under the dropping valuations won’t be Obama’s Marxist insanity, but the Red Chinese practicing free market principles…buy low, sell high. This President needs to be recalled before he does any more damage.

  53. It is imperative that our nation understands the dynamics of the underlying causes of the housing meltdown. This includes getting to all of the elements of the housing meltdown in these four states.

    How much of it was housing for illegal aliens? How much was due to predatory lending? How much of it was because of Fannie and Freddie? If we don’t understand all of the root elements of the cause, we will just keep repeating the same stupid acts that caused this.

  54. The problem was always in the sand states.

  55. Yes, and now our Dear Leader wishes to enact the policies that California has had for 50 years on all the rest of us…we are SO fucked.

  56. According to Realty Trac, in Jan 09 274k homes recieved foreclosure notices. That was 1 out of every 466 homes in the US. That means there are 127million homes in the US (110mil occupied).

    If foreclosures keep up at the current pace, there will be 2.5% of the total housing stock either foreclosed or in the process by year end.

    Which is the number I think was foreclosed on last year (some 2.5 mil or so).

    The numbers of foreclosures are cumulative, and growing larger.

  57. Should this be considered a bad thing?

    If yes , then should not the crash of the oil market be considered a bad thing too?

  58. Guy, guys, guys – you have it all wrong – Obama is actually PUNISHING the irresponsible home buyers. By banning banks from re-seizing the bad assets from out of these peoples’ hands, he leaves them saddled with huge debt on a bad asset, and with their credit ratings getting continually ticked for non-payments. That’s how you have to do it – drag them deeper into the mud, and kick them to death when they’re down. Mwaa ha ha!

    And he’s able to bankrupt the big, bad predatory lenders at the same time! What a new shining age of responsibility!

  59. rachel, you need to go to one of the big o’s re-education camps because you are too stupid to understand the article.

  60. Dont none of you geniuses git any notions about cheap Vegas real estate. By the time them ornery socialist polecats git done taxin’ and spendin’ there aint gonna be nobody with the dough to buy a ticket on Harry Reid’s Magnetic Train To Nowhere let alone plunk down any bets. Your $10 million weekly unemployment check will be just enough for you to afford some crackers to eat with your Free Government Cheese! That mangy critter Reid is going to Save The Planet by nationalizing the weather, a course of action which will certainly include the end of private automobile ownership; can we afford to do any less for our polar-bear friends? But tumbleweeds will blow down the empty, shuttered Las Vegas Strip, and we’ll be able to survey the giant ghost town in the desert and think of the folly of a group of people stupid enough to vote for half-wits like Harry Reid and Barak Obama and then complain when they fall off a cliff.

  61. The question is, of these .79%, how many are are pooled into CDOs? What were these CDOs rated by the agencies? Who owns them? What is their current performance/rating? And follow the money into synthetic CDOs and CDS. This will explain much of the seemingly disproportionate impact.

  62. Just “coincidentally”, what do all of these 4 states have in common, but is unique from other states? Not only are they retirement states, but they are states with an exceptionally high number of ILLEGAL aliens.

    So what that 87% figure tells me is that the vast number of the foreclosures are on people who invested in 2nd, 3rd and 4th homes, expecting to flip them and sell to the enormous demand they expected from baby-boomer retires looking for that retirement home in a warm climate. And the rest being sold to ILLEGALS, who had no business qualifying for a home loan in the first place.

    Phoenix is so overbuilt because of that perceived demand that should never have been. So not only are we experiencing high foreclosure rates, but the volume of homes is now in excess of demand, causing depressed values. A double-whammy!

    And neither of those 2 categories of buyers (investors or ILLEGALS) deserve any form of bailout with our tax dollars.

  63. Unfortunately they did not see the news report this week from REALTY TRAC that found 70% of foreclosures are still hidden on banks books, so we have a long way to go yet. Unfortunately, the congressional budget office said the big stimulus bill was more spending verses job creation.

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  65. there have been analysis by several economists which show that the national housing price declines and foreclosures have not been as severe. so just hold your coupons and stay calm.

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