Foreclosure crisis reaches well off suburbs and small towns in US

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The foreclosure crisis in the US is moving into small towns and suburbs which have previously been untouched by the economic downturn, according to new research.

A new report from RealtyTrac show a dramatic increase in foreclosures from a year ago in suburban areas previously believed to be more stable, such as Boise, Idaho, up nearly 22% from the second quarter of the year and Provo, Utah, which saw foreclosures up almost 11% in the same period.

In several states foreclosure activities have reached smaller towns with previously self-sustaining industries such as Chico in the Sacramento Valley, California, which has seen a staggering 98% increase in foreclosures from the third quarter of 2008.

The Las Vegas metro area had the highest percentage of foreclosures among its housing units in the third quarter, up 5.13% followed by Merced, California, up 3.72% and Cape Coral in Florida up 3.67%.

‘We are seeing migration into secondary markets and a migration into formerly stable areas and areas that have been wracked by unemployment,’ explained Rick Sharga, the vice president of marketing at RealtyTrac.

Sharga said that he expects a peak in foreclosures in 2010, only a marginal improvement in 2011 and a return to normal monthly foreclosure activity sometime in 2012.

‘Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,’ added chief executive James Saccacio.

‘While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option ARMs are spreading the foreclosure flood to more metro areas in 2009,’ he said.

Meanwhile, a rush of property buyers is pushing up real estate transactions as they try to beat the government’s deadline at the end of November for the $8,000 tax credit for first time buyers.

The latest figures from the National Association of Realtors (NAR) show that its Pending Home Sales Index rose to 110.1 in September, its eight consecutive monthly rise.

The index now stands at the highest level since December 2006 when it was 112.8 and is 21.2% higher than September last year, marking the largest annual gain on record.

It could be a short lived blip though, as many analysts believe that the recovery in the US housing market is being propped up by the first-time buyer tax credit that was introduced by the Government to boost demand for houses.

‘What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,’ said Lawrence Yun, NAR chief economist.

 

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