Vacant foreclosures in Ohio forming housing black hole
Every single vacant, foreclosed property in Ohio is proving to be a black hole that sucks down home prices, sits on the market for significantly longer, blights entire neighborhoods and boggles the mind through the sheer amount of REO volume. Foreclosures in parts of Ohio have the potential to significantly weigh down home values since these properties suffer from an abundance of market disinterest. The average vacant foreclosure has a very high vacancy rates for more than a year following a sheriff's sale, and is more likely than homes sold in more traditional ways to be vacant up to 60 months, according to a report from the Federal Reserve Bank of Cleveland. Research economist Stephan Whitaker studied the impact of foreclosure-related vacancies in Ohio's Cuyahoga County — an area significantly impacted by an influx of foreclosures and generally viewed as ground zero for the subprime crisis.. Whitaker followed vacancy rates in the region and found a home with a foreclosure in its past is more likely to be permanently scarred. As proof, he said the data painted a picture where foreclosures two to five years after going through Sheriff's sale are still more likely to be vacant when compared to their neighboring counterparts. Considering 1.85 million homeowners received a new foreclosure notice last year, Whitaker wrote that "foreclosure and the vacancy it causes are a concern for policymakers because a foreclosure's impact extends to hundreds of people in the neighboring community." While vacant foreclosures are more likely to be in high-poverty areas, Whitaker said foreclosures located in other communities are still more likely to remain vacant when compared to other homes nearby. Other risks foreclosures pose to the community at-large include the aesthetics of the property and the neighborhood, itself. Whitaker said prices are more at risk of falling in neighborhoods where "the exterior of a vacant home" is not maintained. "This detracts from the vitality of the neighborhood and the prices buyers are willing to pay for nearby homes," he said. Whitaker cited a study from researchers John Harding, Eric Rosenblatt and Vincent Yao, which concluded a distressed property within 300 feet of a normal home sale could depress the sales price as much as one percent. In a similar study, Dan Hartley with the Federal Reserve Bank of Cleveland said foreclosures in neighborhoods riddled with vacancies have the potential to depress prices as much as 2%. He cited data from researcher Brian Mikelbank that showed in the city of Columbus a vacant home had the potential to push prices down as much as 3.6%. Considering the harm vacancies have had on neighborhoods and home prices, Whitaker said "any incentives or changes in administrative procedure that could shorten the time in REO would be helpful" since a long-term vacancy will end up effecting nearby homes as well. Yet, he also said policy makers should address the problem with a measured, steady hand. "With all complex issues, policymakers need to be mindful of unintended consequences," Whitaker wrote. "For example, forcing banks to decrease the length of foreclosed homes’ time on the market could cause banks to lower sales prices, making the problem worse." Write to Kerri Panchuk.