Foreclosures: America's hardest hit neighborhoods

NEW YORK (CNNMoney) -- The housing collapse has dramatically changed the nation's foreclosure landscape.

Neighborhoods boasting modern homes, cul-de-sacs and tree-lined streets in and around Western cities now dominate the list of the top 100 U.S. zip codes hit hardest by foreclosures and claim and comprise all of the top 10 spots, according to data generated for CNNMoney by RealtyTrac. In 2011, Western states claimed 82 of the 100 worst hit zip codes with 38 in California and another 28 in Nevada.

That's quite a departure from when CNNMoney first looked at the top foreclosure zip codes in June 2007. Back then, the auto industry's ills had turned inner-city neighborhoods in Detroit, Cleveland and Indianapolis into foreclosure ground zero, with the three cities claiming 25 of the nation's 100 hardest hit neighborhoods.

These older working-class neighborhoods were particularly blighted with vacant, repossessed homes lining the streets. In fact, they claimed 6 out of the list's top 10 spots.

These days, however, many of the worst hit zip codes are communities that were built in the past decade or two in and around once-rapidly growing metro areas like Phoenix,San Bernardino, Calif. and Las Vegas, now the poster child of the foreclosure mess.

In fact, Las Vegas claims all five of the top five hardest hit zip codes.The number one spot goes to a neighborhood in North Las Vegas(in zip code of 89031) that recorded 2,469 foreclosure filings last year, according to RealtyTrac.

In California, the towns of Lancaster(93535), in the central part of the state, and Fontana (92336), near San Bernardino, claimed sixth and seventh place -- the highest finishers for any zip codes outside of Nevada.

As far as regions go, the South claimed the second highest number of hardest hit zips with 14. Georgia claimed 12 of those neighborhoods, including one in Atlanta that took 10th place. Interestingly, not a single Northeastern zip code made RealtyTrac's top 100 list.

The foreclosure effect

Foreclosures can devastate housing markets. Properties repossessed by the banks, called REOs, sell for 25% to 50% less than non-foreclosures, said RealtyTrac spokesman Daren Blomquist. Yet, a single foreclosure in an otherwise foreclosure-free neighborhood will rarely impact surrounding values, he said.

"In a normal, healthy housing market an REO sale is the exception and there are many other non-distressed sales that dilute the impact," he said.

NEW YORK (CNNMoney) -- The housing collapse has dramatically changed the nation's foreclosure landscape.

Neighborhoods boasting modern homes, cul-de-sacs and tree-lined streets in and around Western cities now dominate the list of the top 100 U.S. zip codes hit hardest by foreclosures and claim and comprise all of the top 10 spots, according to data generated for CNNMoney by RealtyTrac. In 2011, Western states claimed 82 of the 100 worst hit zip codes with 38 in California and another 28 in Nevada.

That's quite a departure from when CNNMoney first looked at the top foreclosure zip codes in June 2007. Back then, the auto industry's ills had turned inner-city neighborhoods in Detroit, Cleveland and Indianapolis into foreclosure ground zero, with the three cities claiming 25 of the nation's 100 hardest hit neighborhoods.

These older working-class neighborhoods were particularly blighted with vacant, repossessed homes lining the streets. In fact, they claimed 6 out of the list's top 10 spots.

These days, however, many of the worst hit zip codes are communities that were built in the past decade or two in and around once-rapidly growing metro areas like Phoenix,San Bernardino, Calif. and Las Vegas, now the poster child of the foreclosure mess.

In fact, Las Vegas claims all five of the top five hardest hit zip codes.The number one spot goes to a neighborhood in North Las Vegas(in zip code of 89031) that recorded 2,469 foreclosure filings last year, according to RealtyTrac.

In California, the towns of Lancaster(93535), in the central part of the state, and Fontana (92336), near San Bernardino, claimed sixth and seventh place -- the highest finishers for any zip codes outside of Nevada.

Steal this house! 7 foreclosure deals

It's when REO sales rise to 20% or 30% of local sales, as they do in the hardest hit zip codes, that they really begin to affect prices, he said.

"That's when we start to see the average discount between REO sales prices and non-foreclosure sales prices dwindle, particularly in local markets where much of the REO inventory consists of relatively new homes built in the last few years," said Blomquist. "The more REO sales dominate a given market, the more they drag down overall home prices."

In a neighborhood like 32811 in Orlando, Fla., which counted 275 homes with foreclosure filings in just one month last year, home prices have plunged dramatically.

One three-bedroom in the area is currently listed for just under $40,000, for example. In 2005, that same home sold for $120,900, according to real estate agent Jerome Baker.

Not only that, but the listing price is "a little bit on the high end," said Baker. "We'll probably have to lower it to $29,000 to generate some interest."

In Fontana, Calif.'s 92336 zip code, the average home price has been cut in half since December, 2007, according to Zillow.

A four-bedroom, 2,000-square-foot house, was recently listed for $200,500, down 57% from the $465,000 it last sold for in October, 2007. 

Home sales continue to improve

NEW YORK (CNNMoney) -- Home sales ended a difficult year on a high note, resulting in a gain in full-year sales volume.

The National Association of Realtors reported that the annual sales pace in December reached 4.6 million homes, up 5% from November's pace and 3.6% from a year ago.

It was the third straight month of improvement in the pace of sales. The improved fourth-quarter sales volume lifted full-year sales to 4.26 million homes, up 1.7% from 2010 levels.

"The pattern of home sales in recent months demonstrates a market in recovery," said Lawrence Yun, the group's chief economist. "Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market."

Home prices, however, remained depressed, largely because distressed sales continue to make up a significant part of the market.

The median price was $164,500 in December, down 2.5% from a year ago. For the full year, the median price of $166,100 was off 3.9% from 2010 levels. 

Foreclosures fall to lowest level since 2007

NEW YORK (CNNMoney) -- Foreclosure filings and repossessions fell to their lowest level since 2007 last year.
Total filings, including default notices and bank repossessions were down 33% for the year to 2.7 million, according to RealtyTrac, the online marketer of foreclosed properties.
One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That's a significant improvement from the peaks reached in 2010 -- when 1.05 million homes were repossessed -- and the lowest levels seen since 2007.
More than 4 million homes have been lost to foreclosure over the past five years.
While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the "robo-signing" scandal that broke in late 2010.
During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.
"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year," said Brandon Moore, chief executive officer of RealtyTrac.
However, Moore said there were "strong signs" during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011's level but remain below the peak hit in 2010.
Low rates offer some help for homeowners
Early in 2011, many forecasters were predicting a wave of foreclosures due to resetting adjustable-rate mortgages, but low mortgage rateshelped many borrowers refinance into more affordable loans, said Moore.
The government helped as well, through efforts like the Home Affordable Refinance Program (HARP), which made refinancing easier for borrowers who owe more on their mortgage than their homes are worth.

Turning foreclosures into rentals

Government foreclosure prevention programs, including HARP and the Home Affordable Modification Program (HAMP), have started about 5.5 million mortgage modifications since April 2009, according to the U.S. Department of Housing and Urban Development.
"Programs like HAMP and HARP have definitely made a dent in the foreclosure problem," said Moore "However, they are certainly not living up to their billing of preventing several million foreclosures. In addition, many [HAMP] homeowners fall back into foreclosure later on."
Of course, there were still plenty of factors working against homeowners in 2011, including the continued erosion in home prices. Falling prices rob homeowners of home equity, which they can tap if they need emergency cash.
Foreclosure hot spots
Hot spots for foreclosures remain mostly in "bubble states," where speculative investors helped drive up home prices beyond their fundamental values during the mid-2000s housing boom.
Nevada, where one out of every 16 households received some kind of default notice during the year, was the worst hit of all, a distinction it has held for the fifth consecutive year.

Foreclosure free ride: 3 years, no payments

Arizona had the second highest foreclosure rate and California came in third. Florida, which had been running neck-and-neck with the other "Sand States" in past years, fell to seventh, behind Georgia, Utah and Michigan.
Among metro areas, Las Vegas suffered from the highest foreclosure rate in 2011. California put seven cities in the top 10, led by Stockton in the second slot. Other cities in the top 10 included Phoenix, which finished sixth, and Reno, Nev. was eighth. 

Should I use a Real Estate Agent?

Realty Times 1/17/2012  by Carla Hill

The latest NAR Profile of Home Buyers and Sellers showed a growing trend among recent buyers.
The latest figures show that 89 percent of buyers purchased their home with the help of a real estate or broker. This is a sharp increase from a decade ago in 2001, when only 69 percent of buyers enlisted the help of an agent or broker.
Why do today's buyers buyers choose to work with an agent? Let's look at just a few of the many reasons an agent can be your biggest ally.
First, agents are licensed professionals, which means they had to complete coursework and pass an exam in order to become and agent. They have the education and experience to help you navigate what will be one of the biggest purchases of your life.
They also have access to a wide range of properties and can guide you to those that are the best fit for you, which can save you time and energy. If you are unsure what type of property you're interest in, an agent can help explain the pros and cons of things such as condo life versus single-family detached living.
Where are the up and coming neighborhoods? Which areas are more walkable or have access to better schools? These are all issues an agent deals with daily.
They can also ease the burden of buying by simplifying the process. They set up showings, drive you to appointments if needed, and help you handle the intricacies of negotiations.
Today's market also presents challenges that simply weren't present or didn't dominate the market a decade ago. Buyers are faced with some great deals, but through some complicated channels, such as short sale or foreclosure. How does one handle these sort of contracts? Your agent or broker will know.
According to the NAR, "More than ever home buyers are relying on real estate agents and brokers to help them with their home purchase regardless of whether the home they are buying is a foreclosure, short sale, or even a FSBO sale because they need a real estate agent to help them through the process."
Finally, buyers are unsure if now is really a good time to buy. They need to rely on someone with local market knowledge. Is this a good neighbor to invest in? Are prices still dropping in this community? How long do homes take to sell? What is the median selling price? Buyers want the best deal out there.
The 2011 Profile found that more buyers are opting against dual agency, where the agent represents both the buyer and seller. This could signal that today's buyers are very cautious about getting into the market. While a dual agent isn't supposed to harbor any bias, buyers now want to be extra sure they are getting the best deal possible. In fact, "60 percent of recent buyers had an oral or written arrangement with the real estate agent or broker so that the buyer's agent only represented the buyer and not the seller."
If you are considering entering buying a home this year, be sure to strongly consider using a real estate agent. They could be your biggest ally.

Turning Foreclosures Into Rentals

NEW YORK (CNNMoney) -- Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.
The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) to investors in bulk. The properties would then be converted into rentals.
The initiative began back in August, when the Federal Housing Finance Agency, the Treasury Department and the U.S. Department of Housing and Urban Development announced they were seeking suggestions on ways to dispose of repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration.
In addition to getting the properties off the government's books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.
The agency is not releasing details on how the rental program would work, instead saying it is "proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012."
Administration officials said they are continuing to work with the agency to develop the program.

Housing, stocks, gold and oil: Hot or not in 2012?

Until now, most foreclosed homes have been sold individually because investors have demanded bigger discounts to buy large numbers of properties.
But federal officials are warily eyeing the expected surge in foreclosures as banks ramp up their action against delinquent homeowners. The process had been stalled since late 2010 when banks' shoddy paperwork practices came to light.
There are close to 2 million homes in the late stages of delinquency, according to Lender Processing Services. Since foreclosed properties often sell below market value, they can wreak havoc on home prices.
Converting these homes to rentals can both help the neighborhood and minimize losses to Fannie, Freddie and the FHA, which hold about 250,000 properties, Bernanke told lawmakers last week.
He urged lawmakers to ramp up their efforts to fix the housing market, placing particular emphasis on the problem of vacant homes on the market.
"Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery," he said.
Bernanke's comments launched a full-court press by Federal Reserve officials last week to raise awareness of the continuing problems plaguing the housing market.
His proposals were quickly followed by Fed Governors Sarah Bloom Raskin, who spoke on ramping up enforcement of mortgage servicers, and Elizabeth Duke, who said Fannie Mae and Freddie Mac could do more to help heal the housing market.
Meanwhile, New York Fed President William Dudley gave a speech that touched on a wide range of housing policies -- including principal reduction and mortgage refinancing -- that he believes will boost the economy.
The Fed has already tried to boost real estate sales by pushing mortgage rates down to record lows through massive bond-buying programs.
But the renewed push for housing help indicates that the Fed, which has basically run out of monetary policy ammunition to revive the real estate market, is urging the federal government to ramp up its efforts.
"The Federal Reserve is signaling in even stronger terms the need for the government to do more to help housing," said Jaret Seiberg, a policy analyst with the Washington Research Group. 

 

First Published: January 9, 2012: 5:26 PM ET