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Unemployment Will Continue To Drive Mixed Foreclosure Performance

Despite declines in the hardest-hit areas, according to the RealtyTrac 2010 Year-End Metropolitan Foreclosure Market Report, foreclosure activity increased from 2009. And the main culprit is unemployment.

Compared to yearend 2009 all metro areas with the 10 highest foreclosure rates posted decreasing foreclosure activity, of which up to six also posted decreasing foreclosure activity compared to 2008.
RealtyTrac CEO James Saccacio argued that high unemployment drove foreclosure activity up in 72% of the nation’s metro areas, “many of which were relatively insulated from the initial foreclosure tsunami.”

These data show some improvements reported in the hardest-hit housing markets are relative. Foreclosure levels in most of those markets remained five to 10 times higher than historic norms.

The report reiterates that it may get worse before foreclosure rates improve meaningfully. The reason, according to Saccacio, is that “deep fault lines of risk remain and could potentially trigger more waves of foreclosure activity in 2011 and beyond.”

The 2010 yearend drop in foreclosure activity in the hardest-hit areas also indicates that while this segment of the market may be closer to its peak, it appears to be even further away into the future in 149 of the nation’s 206 metropolitan areas with a population of 200,000 or more.

By yearend California, Florida, Nevada and Arizona continued to account for 19 of the top 20 metro foreclosure rates.

Boise City-Nampa, Idaho, was the lone exception ranking No. 20. Boise also was one of only three metros in the top 20 where foreclosure activity increased from 2009, along with Florida’s Deltona-Daytona Beach-Ormond Beach and Tampa-St. Petersburg-Clearwater.

At 10.88% the nation’s highest metro foreclosure rate was in Las Vegas-Paradise where one in every 9 housing units received a filing in 2010—nearly five times the national average. A total of 88,198 properties received a foreclosure filing in 2010, a decrease of 7% from 2009 that nonetheless was up 31% compared to yearend 2008.

Improvements in Florida also remain significantly relative. For example, despite decreasing foreclosure activity by 28% and 25%, respectively, from 2009 and 2008, at 8.4% and a total of 30,660 properties receiving a filing in 2010, or one in every 12 housing units, Cape Coral-Fort Myers, Fla., features the second highest metro foreclosure rate in the country.

The nation’s third highest metro foreclosure rate at 7.34%, or one in every 14 housing units was Modesto, Calif., which also reported a decrease in foreclosure activity from 2009 and 2008.

An overview of trends in the 20 largest metro areas—which shows foreclosure activity was evenly split between the metro areas where foreclosure activity decreased compared to 2009, and those where foreclosure activity increased—makes it clear that recovery is very slow and stabilization still at limbo.
Also geographically metro areas that saw the biggest changes were scattered between the East Coast and the West Coast as well as within state lines.

Washington topped the ranking of metro areas with the biggest annual decreases in foreclosure activity with a 22% drop.

While California continues to stay at the top of “most problematic states,” the next three best-performing metro areas were in Southern California. Riverside-San Bernardino-Ontario followed Washington down 20%, San Diego-Carlsbad-San Marcos was down 17% and Los Angeles-Long Beach-Santa Ana was down 16%.

As to metros with most bank repossessions in 2010, at the top was Phoenix-Mesa-Scottsdale with 55,372 up 17% from 2009, Chicago-Naperville-Joliet with 45,555 up nearly 20% from 2009 and Detroit-Warren-Livonia with 43,541 up 19% from 2009. Miami-Fort Lauderdale-Pompano Beach with 42,630 and Atlanta-Sandy Springs-Marietta with 38,535 also posted increasing REO activity compared to 2009.

Another concern for 2011 and beyond will be the risk of seeing more foreclosure filings eventually turn into REOs and add to existing inventory.

RealtyTrac's yearend 2010 foreclosure market report shows that a record of 2.9 million properties received foreclosure filings by the end of 2010, up 2% from 2009 and 23% compared to 2008.
Nevada, Arizona, Florida and California remain at the top of these rankings as well.

One in 11 Nevada housing units received at least one foreclosure filing in 2010—the highest in the country for the fourth consecutive year and despite improvements compared to 2009.

A total of 155,878 Arizona properties received a foreclosure filing in 2010, 4% less from 2009 but the third biggest state total for the third straight year. At 5.73% Arizona registered the nation's second highest state foreclosure rate for the second year in a row with one in 17 housing units receiving at least one foreclosure filing in 2010.
 
Florida ranked third at 5.51% or one in 18 housing units receiving at least one foreclosure filing during the year, and the nation's second biggest total in 2010 of 485,286 properties receiving a foreclosure filing. Florida foreclosure activity in December hit the lowest monthly level since July 2007, down nearly 54% from December 2009.

Even with improvements California also remains at the top 10 non performing markets. A total of 546,669 California properties received a foreclosure filing in 2010, a decrease of nearly 14% from 2009 but still the largest state total. After hitting a two-year low in November, the state’s foreclosure activity rebounded nearly 15% higher in December, which nonetheless was 18% lower than December 2009.