Detailed Findings and Methodology
During the recession, areas with rapidly declining home values also usually had much higher foreclosure rates. Since then, the relationship has persisted — With the return of home prices to pre-recession levels, the foreclosure rate has also dropped dramatically.
Nationally, the typical U.S. home is worth about 7% more today than it was in 2009. In all but four of the 20 states with the higher foreclosure rates, home prices rose less than the 7% during that time.
Daren Blomquist, senior vice president with ATTOM Data Solutions explained that the correlation between home prices and foreclosures is due to a number of factors. “In Areas that lingering high foreclosure rates, [those rates] hold down home values…” Blomquist continued: “The lingering high foreclosure rates create uncertainty in those housing markets, and so it holds home prices rates down, and as those foreclosures sell, they’re typically selling at a discounted price.”
Those mortgages with severe debt are at risk of finding themselves underwater. This means the amount of money owed on the home exceeds the total value of the property. In general, the states which have the highest foreclosure rates also tend to have the largest share of homes that are seriously underwater, meaning that the debt owed on the home is at least 125% of the value of the property.
As recently as the fourth quarter of 2013, over one in four homes were seriously underwater. That has declined to less than 10%. In 16 states, more than 10% of homes are underwater. Of those, 11 states are in the top 15 for foreclosure rates. In Nevada, which has the sixth highest foreclosure rate, about 19% of homes are seriously underwater.
Blomquist explained why the relationship seems to hold – “If you have equity in your home, you probably at least have the option of selling and avoiding foreclosure. But if you’re underwater, more likely you won’t have that option, and you’re going to have to go into foreclosure.”
To determine the states with the most foreclosed homes, 24/7 Wall St. reviewed state-level foreclosure rates provided by ATTOM Data Solutions, a real estate data analytics company. Foreclosure rates used in the rank refer to housing units that were in some stage of the foreclosure process in 2016. ATTOM’s estimates for the population and the number of housing units, as well as figures for median home value come from the U.S. Census Bureau’s American Consumer Survey. The most recent available data from the ACS is 2015. ATTOM also provided 24/7 Wall St. with the share of mortgages that are seriously underwater — meaning debt is 125% or more the value of the home.