Sunday, January 15, 2006

North Carolina Defaults Cut Area Resale Prices

A pair of Charlotte Observer articles provide an update on defaults in North Carolina. "Don't make the mistake of thinking Mecklenburg's high foreclosure rate affects only people losing their homes. The problem is much wider. The situation, detailed in a series starting on today's front page, is this. Mecklenburg County led North Carolina in home foreclosure filings in 2004, at 8.6 per 1,000 people. The state average was 5.0."

"Why so high here? The problem is likely caused by several converging trends and some well-intentioned efforts to boost more people into home ownership. In the 1990s the federal government slackened regulation of financial services. Lenders began marketing high-interest-rate loans to people who don't qualify for regular loans. Those buyers are more likely to default."

"Some neighborhoods see so many foreclosures that even owners who keep up payments can't sell their houses for what they paid for them. They're trapped. In recent years the city of Charlotte allowed, even encouraged, development of dozens of neighborhoods filled only with low-cost 'starter houses.' Those areas are most vulnerable to foreclosures and lowered values. The Observer found a stunning 54 neighborhoods had high concentrations of foreclosures on at least one street between 2003 and early 2005. The highest on any street, 69 percent, was on Hope Valley Lane in northeast Charlotte's Northridge Village."

"In neighborhoods with large numbers of foreclosures, it can be hard to resell your home for a profit. Average prices actually declined in 39 of 73 neighborhoods with high foreclosure rates, most of them low-priced. A study of property values in Chicago found each foreclosed home within a city block decreased the value of a home by 1 percent."

"Foreclosed homes often are resold at steep discounts, undermining the market for neighboring homes. Such homes also can stay vacant for months or years before resale, creating eyesores that may deter potential buyers of neighboring properties. 'If there are multiple foreclosures on a street, people know it,' said Dan Immergluck, a professor at Georgia Tech University who co-authored the Chicago study."

"The best advice for home shoppers? Make sure you know it, too."


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