Foreclosures in States and Metropolitan Zones being Analyzed

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Julie Parker

Julie Parker was born in March 19, 1983, in Lancaster – Los Angeles County, California. Her father is an experienced economist and businessman, who motivate her taste for the real estate market. Recently, graduated in Economics and now focus her studies in a PhD. Now she’s a consultant and webwritter of ForeclosureListings.com

Foreclosures in states and metropolitan zones are being analyzed and the accusing finger points to financial manipulations that have brought about this international recession. Professor William Lucy and student Jeff Herlitz of University of Virginia came to this conclusion after studying details in 50 states, 35 metro zones and 236 counties.

The survey shows that the worst concentrations have been in California, Florida, Nevada as well as Arizona. The survey claims, “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.” The report noted that although California recorded 10% of the housing units in the nation it accounted for 34% of the foreclosures in 2008.

California was a vulnerable state. The median value of residential (owner occupied) houses in 2007 was 8.3 times higher than the average family income. In 2007 the national average showed it was only 3.2 times more than median family earning. In 2000 it was even lower at 2.4 times.

On another point California was more vulnerable. In the Los Angeles metro zone over 20% of the mortgage holders in each of the counties were spending 50% of their earnings on costs related to housing.

Within California there were variations in foreclosure concentrations. In Solano County 3.69% of the houses were in foreclosure in November 2008, while in San Francisco City only 0.24% was in foreclosure. The difference was 15 to 1.

In USA from 2000 to 2006 there was a 10 month supply of houses to be sold – six months more than the norm set from 1998 to 2005. Most of the extra houses came from the foreclosed category in the declining regions. It made up 45% of the total sales in some of the months of the year 2008. Only a modest number comes from new houses.

The losses in value of houses from 2008 foreclosures covering all the 50 states were less than a third of the $350 billion given to banks and the insurance firms to manage the losses it had suffered from trading in mortgage-backed-securities.

Lucy and Herlitz explained, “Damage to the balance sheets of large banks and AIG occurred not mainly from losses on foreclosed residential mortgages, but because of borrowing short-range to buy long-range derivatives and from selling credit default swaps insuring derivatives backed by mortgage payments. These financial manipulations had high-speed forward gears, but when the housing bubble burst, the banks and AIG discovered they had neglected to create a reverse gear with which they could separate foreclosed properties from some forms of mortgage-backed securities.”