A widening gyre of foreclosure, unemployment, and lost home equity continues the drag down the nation’s economy. According to RealtyTrac reports via an Associated Press article by Alex Veiga, foreclosures increased in 149 of the 206 largest U.S. cities in 2010.
Continued high unemployment and lost income is one of the main drivers of the new wave of foreclosures. Unemployment has remained stubbornly high and was at 9.4 percent in December. The U-6 measure of unemployment, which includes marginally attached workers as well as those who are working part time for economic reasons is at 16.7 percent. In addition, the labor force participation rate is at 25 year lows, meaning there are a whole lot of people who would normally be working that aren’t even looking for jobs anymore.
Rick Sharga, Senior VP at RealtyTrac commented:
“We’ve had a sea change in what’s causing foreclosures, from the overheated home prices and bad loans to a second wave of foreclosures actually caused by unemployment and economic displacement”.
Areas that weathered the first round of foreclosures are getting hit hard this time around. Houston, Seattle, and Atlanta all saw foreclosures increase by more than 20 percent in 2010. Florida, Arizona, California, and Nevada continue to have some of the highest rates of foreclosure in the nation.
This is despite the fact that many banks put temporary moratoriums on foreclosures in the last quarter of 2010 in response to the robo-signing crisis. These banks have since resumed foreclosure activity. There were about 1.8 million foreclosures and 1 million home repossessions in 2010. Both figures are expected to be eclipsed in 2011. Said Sharga:
“We believe we’re going to see an abnormally high growth of foreclosure activity in the first quarter and we do expect that 2011 will be another record year fore foreclosure activity and bank repossessions.”
This will only add to the already massive inventory of unsold homes, which will continue to put downward pressure on home values. This is turn will drive more property owners underwater (more than 2 million homeowners have little to no home equity). This is turn causes more foreclosures. As Lee Elia would say, “it’s a disheartening situation we’re in right now.”
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