Realtor.com:
Foreclosures in America are on the rise for the second year in a row. This puts a firm bookend on an 11-year decline in the forced repossession or sale of a home when a homeowner can’t pay the mortgage.
But let’s take a deep breath: The current rise in foreclosure activity is not uniform across the country. Even more than 15 years ago, when the bottom fell out of the housing market, there are more distressed properties in some areas than others. That’s why the data team at Realtor.com® went out to find which places are experiencing high—and growing—percentages of foreclosure filings.
However, before anyone panics, there is no wave of foreclosures threatening to wash across the country, bringing down home values like the epic crash that occurred during the Great Recession. And the foreclosed properties that do make it onto the market will likely be snapped up quickly by buyers frustrated by high prices and the lack of homes for sale.
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In June, roughly 2.5 out of every 10,000 homes had a distressed property or foreclosure filing, according to data provided by ATTOM, a real estate data clearinghouse. In the first six months of 2023, the total of homes receiving a foreclosure filing was just under 186,000. In the years around the housing recession of the late 2000s, about 15 times as many borrowers were going through foreclosure.
The current increase is likely due to the pause in foreclosure activity during the COVID-19 pandemic, says Geoff Walsh, a staff attorney at the National Consumer Law Center.
Today’s rise in foreclosure filings is now catching up with borrowers who might have otherwise already been foreclosed on months or years ago.
We found the current foreclosure rate is highest (and climbing) in several medium-sized metros, scattered across the Southeast and Northeast. One factor that can sneak up on homeowners is rising property tax assessments, in the wake of the breakneck pace of home value increases of the past few years.
“As property values have exploded in some areas,” says Hannah Jones, an economic research analyst at Realtor.com, “property taxes have as well.”
In Austin, where Jones lives, a friend’s property tax bill rose $700 per month.
“It can make these homes unaffordable even if the owner has a low mortgage rate,” says Jones.
And a rising tax bill is just one cost of living crunch among others, as inflation has meant soaring grocery and gas bills in recent years. All of it squeezes homeowners’ budgets.
However, those same rising property values provide struggling homeowners with a measure of protection. If they can’t make their mortgage payments, they can put their homes up for sale. And in many cases, they are able to walk away from the sale with a profit.
To make some sense of what’s going on with foreclosures, we ranked metropolitan areas with high and growing foreclosure rates by comparing June 2023 ATTOM data to May 2023 and June 2022 to see where the foreclosure rate is rising month over month and year over year. Then we ranked these metros based on the current foreclosure rate. We selected only one metro per state.
Foreclosure filings include default, lis pendens, trustee sale, foreclosure sale, and real estate-owned notices.
Here are the places with high and growing foreclosure filing rates.
1. Atlantic City, NJ
Median list price: $392,450
June foreclosure filings per 10,000 housing units: 6.8
Atlantic City, an iconic beach town renowned for its casinos and boardwalk (one of the longest in the world) as well as its infamous role in Prohibition-era bootlegging, has nearly 7 out of every 10,000 housing units facing foreclosure. This isn’t new for the area, which struggled with foreclosures after the housing bubble burst.
According to David Fiorenza, an economics professor at Villanova University, the rise in distressed properties here is partly due to a hangover from the COVID-19 stimulus package that helped pr0p up the local economy.
“You had the ARPA money propping up the finances of these local governments,” Fiorenza says of the American Rescue Plan Act of 2021. “They used it for infrastructure, like roads and highways, and they bought police cars and firetrucks. Those things are good, but now these governments are catching up.”
That means more tax revenue is needed—which can show up in the form of higher property taxes. Exacerbating the problem, the city has a higher-than-average poverty and unemployment rate.
Atlantic City has long been marked by economic swings, Fiorenza says, with the gaming and entertainment industries largely dictating the health of the local economy.
It’s been an especially wild roller coaster in the past few years, he says, with casinos closing and reopening. It can have the downstream effect of homeowners not keeping up with their mortgages.
“I don’t think anyone saw this coming,” he says. “I didn’t.”
2. Florence, SC
Median list price: $273,950
June foreclosure filings per 10,000 housing units: 6
Florence, located in the northeastern part of South Carolina about an hour east of the capital city of Columbia, is in an area called “Pee Dee,” after the Pee Dee River that flows through the Carolinas’ Appalachian range.
The housing stock in Florence is mostly single-family homes, predominantly ranches and two-story units. A bonus for buyers is homes here are priced well below the national average of $445,000 in June.
At 6 foreclosures for every 10,000 homes, the rate in the Florence metro is about 2.5 times the national average. And it’s been rising, up 15% since the same time last year.
For homebuyers, it means there are deals to be had. For just $55,000, home shoppers can get a four-bedroom foreclosed home in the Florence area.
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