Tucson Ravaged By Foreclosures

Posted in Foreclosures, November 27th, 2007 |

Not a single corner of Tucson has been spared from the foreclosure virus. Thousands have lost or about to lose the roof above their heads. More than 500 houses have been gobbled up during the first nine months of 2007 – double that of the figures of last year. All are affected from the lower income group residing on the South Side to the upbeat localities near Catalina Foothills.

Foreclosures have always been on the scene because of usual stories of life – unemployment, marriage blues or unforeseen medical bills. But this year the surge is causing concern and the culprit seems to the risky sub-prime mortgage lending activity of the past two years.

Many moved into houses with loans they could ill afford. Others refinanced their mortgages with these risky loans. Behind it was the logic that real estate prices could never fall but always rise. But the reverse happened causing this catastrophe. Property prices have fallen but interest continues to rise.

Most of the foreclosures are in pockets that have seen intense sub-prime mortgage activity from 2005 to 2007. These ‘Alt-A’ loans were not as stringent about prerequisites as the prime conventional loans. They were marketed to those who understood little about the financial pitfalls in the near future. Moreover these loans came with steep prepayment penalties to stop borrowers from refinancing until the high interest rate had begun to be effective. The agreements were totally one sided.

Calls to local offices dealing with distressed property buyers have gone up by four times since 2003. Many had bought houses or refinanced their loans when property values had reached Himalayan heights about two years previously. But now the scene is topsy-turvy. The hiccups in the real estate market are making it impossible to sell the house and salvage the situation. Often the house is worth less than the loaned amount! It is a sellers market.

The northeastern and southwestern outskirts of Tucson metro area saw some of the worst concentrations of foreclosures. Compared with last year, today the figures have doubled. In some places the increase is by 76%. The lower income neighbourhoods are particularly badly affected. Midvale Park tops the list in Tucson.

The foreclosure spillover is affecting tenants also whose landlords are infected with foreclosure. With this trend continuing there is every fear that prices of real estate will continue to fall further.