A new study released Wednesday found that one in 33 homeowners nationally is projected to become a foreclosure statistic over the course of the next two years, underscoring the widespread impact the U.S. housing downturn will have on local housing markets throughout the nation. In some states — particularly former booming housing markets — the outlook is especially grim; for instance, nearly one in 11 homeowners in Nevada is projected to be in foreclosure and one in 18 Arizona homeowners may face the same circumstance over the next two years, according to the study.
The report, a joint effort between the Pew Center on the States and Pew’s Health and Human Services Program, found that price declines are likely to affect more than just the millions stuck in foreclosure — an additional 40 million neighboring homeowners may see their property values and their municipalities’ tax bases drop by as much as $356 billion over the next two years alone. HW readers have known for some time that foreclosures affect neighborhoods, and local cities, but the Pew study is one of the few that has set out to quantify the expected impact. And the numbers are huge, as any industry participant would expect. “Stronger standards from federal policy makers could have helped avert this crisis,” said Shelley A. Hearne, Managing Director of Pew’s Health and Human Services Program. “Future legislation must consider ways to strengthen standards to prevent more troubling loans from being made. Let’s make certain federal laws build upon, rather than preempt, the strong and smart state efforts already underway and ensure that states retain flexibility to respond to local circumstances.” Of course, I take strong issue with a characterization all state-led efforts either “smart” or “strong” in many cases — Maryland, I’m looking at you — and I also have a problem with the suggestion that says patchwork state-led laws should set precedent over a national, Federally-defined standard. Lenders for years have rightfully complained that navigating a patchwork set of state laws on lending only increases costs to consumers to obtain a mortgage. And, right now, I don’t think that’s the sort of higher-cost precedent anyone ought to be encouraging. The Pew report singled out California, however, as a particular laggard in reigning in industry practices; it’s an interesing jab at a state many consider to be ground zero for both the housing boom and the resulting bust. One in 20 homeowners in the Golden State will go into foreclosure over the next two years, according to the study. The study’s authors contend that as of the end of 2007, California had done little to help to financially distressed homeowners, joining Arizona, Florida and Utah in the slow-to-respond category. For more information, visit http://www.pewtrusts.org.
