Abstract
The metropolitan Washington housing market, just beginning to stabilize at midyear, will have to deal soon with tens of thousands of additional foreclosed homes thrown onto the market, an Urban Institute study forecasts.
Contact: Stu Kantor, (202) 261-5283, skantor@urban.org
WASHINGTON, D.C., October 28, 2009 — The metropolitan Washington housing market, just beginning to stabilize at midyear, will have to deal soon with tens of thousands of additional foreclosed homes thrown onto the market, an Urban Institute study forecasts.
Increasing unemployment will drive many mortgage holders toward delinquency and, eventually, foreclosure, the Institute's "Housing in the Nation's Capital 2009" report warns. At the same time, high foreclosure rates for subprime loans will erode some of this decade's progress in minority homeownership.
About 104,200 mortgages — almost 8 percent of all loans in the region — were delinquent but not yet in foreclosure in June. Of these, 51,500 were seriously delinquent — more than 90 days past due — and very likely headed to foreclosure. Thirty-one percent of these seriously delinquent mortgages were prime loans, nearly triple the 11 percent share in early 2007.
At midyear, 35,900 homes were for sale in the region, representing what would normally be about five months of transactions. At least 15,200 foreclosed homes were owned by lenders, and not all are on the market yet. On a positive note, reduced prices, low interest rates, and the federal tax credit for new homebuyers are drawing buyers back into the market. Home sales in the first half of the year were 11 percent higher than a year ago.
"The foreclosure crisis is far from over, and the hardship is not distributed evenly across the region," says Kathy Pettit, the report's lead researcher. "How well area governments and service agencies coordinate their responses will influence the pace of the housing market recovery and determine the extent of long-term harm on our neighborhoods and families."
Problem Loans: Past, Present, Future
From January 2007 to June 2009, the number of loans in foreclosure skyrocketed eightfold from 4,000 to 33,600 out of 1.2 million loans. As of June, 2.7 percent of all the region's mortgages were in the foreclosure inventory, comparable to the national rate of 2.9 percent.
Subprime loans were most likely to be in default; 12 percent of them in June had begun the foreclosure process. These risky loans drove the initial foreclosure surge and are still disproportionately represented in the foreclosure inventory. Subprime loans accounted for 11 percent of all mortgages in the region, but about half those in foreclosure.
From 2004 to 2006, the peak housing boom years, minority homebuyers received about 80 percent of the high-cost loans. This boost in lending contributed to a rise in minority homeownership. By 2007, 53 percent of African Americans and 58 percent of Latinos owned homes. But problems with subprime loans — exacerbated by the shaky economy — are expected to diminish the gains made over the past decade.
Foreclosure rates in June were highest in Prince George's County (5.2 percent), which had nearly a third of the area's foreclosures; Charles County (3.9 percent); and Prince William County (3.7 percent). Alexandria and Arlington, at less than 1 percent, had the lowest foreclosure rates.
The hardest-hit ZIP codes were in the Prince George's communities of Bladensburg, Riverdale, Adelphi, and Brentwood, where 7-9 percent of loans were in foreclosure. All counties except Arlington, Stafford, and Warren had some ZIP codes with foreclosure rates over 3 percent.
In the District, 1.8 percent of loans were in foreclosure, with the Deanwood, Congress Heights, Barry Farm/Anacostia, and Brightwood Park/Petworth areas facing the most difficulties.
Most households entering foreclosure will lose their homes. Analysis of District foreclosure data shows that 80 percent of homeowners entering the process in 2007 gave up their homes through a completed foreclosure sale or a sale soon after the notice of foreclosure.
The fallout from the crisis is hitting many who don't own homes. At least 1,900 District renter households were living in foreclosed properties in April, almost half the 3,900 families affected by foreclosures. Despite federal and local eviction protections, many renters, especially low-income ones, will eventually have to move and face trouble finding a new unit, particularly in the District and close-in suburbs, where rentals remain unaffordable to most low- and moderate-income households. In addition, some 1,380 District public school students in October 2008 were affected by foreclosure, double the figure for two years earlier.
"Housing in the Nation's Capital 2009," the 7th annual study, and its "Foreclosures in the Nation's Capital" companion brief were written by a team from the Institute's Metropolitan Housing and Communities Policy Center. Kathy Pettit, Tom Kingsley, Mary Cunningham, Leah Hendey, Jennifer Comey, Liza Getsinger, and Michel Grosz used mortgage data from LPS Applied Analytics, a commercial firm; District of Columbia local property files; and data gleaned from Home Mortgage Disclosure Act filings.
This year's report, brief, and data tables are at www.urban.org/center/met/hnc/. The District of Columbia and 21 counties and cities in Virginia, Maryland, and West Virginia were studied.
The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance challenges facing the nation. It provides information, analyses, and perspectives to public and private decisionmakers to help them address these problems and strives to deepen citizens' understanding of the issues and tradeoffs that policymakers face.
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