Sunday, December 11, 2005

Subprime Loans Plus Flat Prices Equals Defaults

The Middletown Journal reports on the unfolding default crisis in Ohio. "The number of foreclosure filings in Butler County has more than tripled in the last decade as Ohio has become the nation’s leader in home loan defaults. According to Butler County Clerk of Courts records, one of every 187 county residents experienced foreclosure last year."

"Between 1994 and 2004, foreclosure suits filed in Butler County grew 266 percent from 487 to 1,782. A JournalNews study of last year’s filings showed that Hamilton and Middletown led the county with 492 and 422 filings, respectively."

"There are multiple reasons for the increase. Between 2000 and 2004, as companies like Champion and International Paper closed local operations and others such as AK Steel cut hundreds of jobs. But foreclosures can’t be explained by job loss alone. Growth in foreclosure filings, both in the county and at the state level, took off in the middle to late 1990s. This was at a time when unemployment rates were falling and household incomes were growing."

"'This was when the economy was really riding high, in the late 90s, when this rate took off and skyrocketed,' Policy Matters Ohio Research Director Zach Schiller said. 'One thing that was happening at this time was major growth in the subprime market.'"

"Another factor is Ohio’s low home appreciation rates. Statistics from the Office of Federal Housing Enterprise Oversight show that states with the lowest appreciation rates also have some of the highest foreclosure rates."

"Of the 10 states with the lowest appreciation rates, four (Ohio, Mississippi, Indiana, and Michigan) were among the nation’s top 10 in foreclosure rates. Those with the highest appreciation rates, Arizona, Florida and Hawaii, all more than 20 percent, had foreclosure rates ranging between half and a quarter of the national average."


At 2:13 PM, Blogger Contrary Guy said...

One thing left unmentioned is that the eastern part of Butler County is probably the fastest-growing area in the state, as wide expanses of previously unoccupied (or farmed) land are built upon. One of those cases where you wouldn't recognize the place from 10 years ago (I know I don't).

And much of the new housing is in the McMansion category. It's a tale of two worlds: old industrial vs. new, suburban/exurban bedroom communities, and they're all overextended.


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