Foreclosure Crisis in Michigan Deeper, Worse than Most
The combination of declining home prices and increasing foreclosure filings has been the one-two punch that has kept many homeowners from stopping foreclosure and keeping their homes.
The knockout blow is that some areas never saw the dramatic run-up in home prices.
Take a look at this chart:
Cities with the largest price declines also have the the most homeowners trying to avoid foreclosure. [Source: Seeking Alpha
Notice that Detroit and Cleveland (ranked 6th and 13th, respectively) have experienced double-digit declines. The key difference between these areas and the rest of the top 20 is that their prices never increased to the degree that the others did during the run-up.
This is one of the major reasons why these areas are now termed “high-risk” by lenders.
And sadly, this shows why these two areas are likely to continue to flounder for years to come, regardless of any government programs designed to prop up housing prices.
Furthermore, it’s not just those who have vintage 2005-2007 loans who are in trouble. If, as some have said, home prices in Detroit are at 1999-2000 levels, then anyone who refinanced or purchased a home since that time are at risk.
The upshot is that foreclosures will continue to increase in these areas. If you live in these areas, you need to account for this in deciding what you want to do to avoid foreclosure. You must begin to look at your house as less of an “investment” and more of a “home.” Housing will likely be the weakest performer in your wealth-building portfolio.
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