The Herald Tribune - Lew Sichelman - January 2017
The foreclosure crisis that hurt so many homeowners may be waning, but now more and more renters are facing eviction.
Property data provider CoreLogic's most recent foreclosure report shows that serious delinquencies - those 90 days or more past due - in the U.S. have dropped below the landmark 1 million plateau. So it just might be time to declare the repossession plague over.
October's 997,000 number for seriously delinquent loans represents a huge drop from the 1.3 million serious delinquencies a year ago. The October number means just 2.5 percent of mortgages are dangerously late, nationwide. That's the lowest percentage since August 2007, just as the real estate and mortgage crises were ramping up.
The year-over-year drop in foreclosure inventory is even more dramatic. It fell by 31.5 percent, from 465,000 units in November 2015 to 328,000 in October 2016. Currently, less than 1 percent of homes with a mortgage is in foreclosure.
The number of loans going into foreclosure has experienced year-over-year drops for the past 60 months. And with fewer and fewer homes still in foreclosure, the number of completed repossessions also is dropping. There were 30,000 of them in October, down 25 percent from the 40,000 seen in October 2015.
"By comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006," according to CoreLogic.
Pressure on renters
But as foreclosure rates finally dwindle, renters are feeling increased financial pressure and the very real possibility of eviction.
No one really knows how many renters are being put out of their homes; the Census Bureau hasn't started tracking the number yet but plans to in 2017. But real estate firm Redfin estimates that 2.7 million renters faced eviction in 2015.
There are local efforts to tally evictions, according to Redfin researcher Taylor Marr. But "even those can far undercount the true number of families that are forced into a move, either formally through housing courts or informally through unscrupulous methods by property owners."
Marr cites some glum market statistics: Rents are up 66 percent since 2000, while incomes have risen only by 35 percent. In 2015, one in four renters was spending at least 50 percent of their income on rent.
Hoping to get some useful national numbers in advance of the upcoming Census Bureau effort, Redfin looked at 6 million eviction records in 19 states. That data gave the company enough confidence to estimate local and national eviction rates.
"Insufficient supply of affordable housing in many cities continues to push up housing costs, which have been rising rapidly," according to Marr. "Household incomes have not kept pace. As a result, the median rent-to-household income ratio grew by more than 2 percent in most metros from 2011 to 2014, according to the U.S. Census.
"We also found that neighborhoods with the highest median rent-to-income ratios have much higher eviction rates than neighborhoods that spend less of their income on rent."
Two of the three cities with the highest eviction rates are in New Jersey. Newark and Camden both have increasingly high cost-burden ratios. But Marr says that isn't the only indicator.
"In Las Vegas, where the ratio is relatively low, one out of 12 rental households are evicted each year," she reports.
One factor at play: Evictions are most common in places with a high concentration of foreign-born residents.
Evictions are especially damaging, perhaps even more so than foreclosures. Whereas former owners can often find rentals to suit their needs, evicted families are often excluded from other rental properties and from participating in the federal Section 8 subsidy program.
Getting booted from your apartment or single-family rental has also shown to cause job loss or, worse, homelessness.
"Communities with high eviction rates have an unstable social structure and are plagued with crime," Marr points out.
Back to foreclosures: New Jersey turns out to be the state with the highest foreclosure inventory as a percentage of mortgaged homes, with a rate of 2.8 percent, according to CoreLogic. New York follows at 2.7 percent, with Hawaii taking the bronze at 1.7 percent. Arizona had the lowest percentage, at 0.3 percent.
Twenty-one states showed big decreases in foreclosure inventory, with Florida, one of the epicenters of the housing crisis, having the biggest decline at more than 41 percent. Florida completed more than 50,000 foreclosures from late 2015 through late 2016. In contrast, Washington, D.C., had the fewest, at 212.