3 States With Disturbingly High Foreclosure Inventories
A few days ago, real estate analytics firm Corelogic announced the status of the foreclosure crisis and the news wasn't very good. A total of 47,000 foreclosures were completed this past May, down from 52,000 one year ago. The decrease represents only a bit more than a 9% improvement over last year, and the news gets worse: completed foreclosures were up by 3.8% month over month, and the U.S. still has a backlog of 660,000 homes in various stages of the foreclosure process.
Some states still have achingly high numbers of homes in the foreclosure pipeline. Notably, the states with the highest buildup of foreclosures are in judicial states, where foreclosures must wend their way through the court system. Foreclosures move to completion more quickly in non-judicial states, where the courts generally are not involved.
But the intervention of the courts is only part of the issue in these states. Here are the top three, with foreclosure inventory for each presented as a percentage of all mortgaged homes.
New Jersey: 5.8%
This state's problems go much deeper than just housing. New Jersey recently revealed an enormous budget deficit, brought about, at least in part, by the dismal employment situation. While the nation at large has been recovering many of the jobs lost during the Great Recession, New Jersey has regained very few. At a time when new unemployment claims are dropping at the national level, New Jersey's are rising. The state's unemployment rate is 6.8%, the twelfth highest in the U.S.
Florida isn't far behind New Jersey, but, considering how badly the Sunshine state was battered by the foreclosure crisis, this fact is not surprising. Several days ago, Fannie Mae and Freddie Mac reported that the agencies now hold a higher number of foreclosed properties from this state than they did at the end of 2010.
Much of this backlog has to do with fraudulent mortgage issues stemming from several large banks, which put foreclosures on hold while lenders tried to put things right. This explains why Florida also has the highest number of "zombie foreclosures" - homes vacated by foreclosed-upon owners, which are then left to deteriorate unabated. RealtyTrac estimates that Florida accounts for nearly 49,000 of these properties, out of a national total of about 141,000.
New York: 4.3%
New Jersey's neighbor was also hammered by the housing crash, and the effects linger still. A recent report by housing activist groups note that 60,000 mortgages are still underwater in Manhattan alone - almost 12% of all home loans. Local politicians are considering enabling the city to take over these mortgages by "eminent domain" to help borrowers stay in their homes.
The situation is so dire that New York's state Attorney General Eric Schneiderman has announced a new mortgage assistance program for troubled homeowners. In addition to existing programs providing free legal help, the NY State Mortgage Assistance Program will provide small loans for those in danger of foreclosure.
A recent RealtyTrac analysis identified New York as one of five states currently offering huge discounts on foreclosure inventory homes, with an average discount of 38.5% on vacant houses with negative equity.
These few examples show that the foreclosure crisis is far from over. As these and other states continue to struggle with the legacy of the mortgage meltdown, it seems very likely that housing will not recover completely until this fiasco is finally resolved.
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