The Spillover Effects of Foreclosures
November 13th, 2007by Laurie Schintler
Here’s an eye-catching statistic: “Foreclosures cost neighbors 223 billion dollars.” This statistic comes from a study just released by the Center for Responsible Lending and its drawing a lot of attention. In their study, they take an unprecedented look at the spillover effects of the recent explosion in foreclosures (2005-2006). They look specifically at the devaluation in property values that the neighbors of those properties are likely to incur and the losses to communities as a result of depreciating property tax bases.
The numbers coming out of the study are ominous. They cite that over 44 million homes in the United States will experience property devaluation as a result of foreclosures in their neighorhoods. Fourty-two counties in the United States can expect to see their property tax base erode by more than $1 billion. And households located in proximity to lost properties could see the value of their property decrease by $5,000, on average.
What parts of the country will get hardest hit?
To examine this, the county level statistics statistics in the Center for Responsible Lending study were geocoded and the hotspots mapped. It should be noted that while their analysis is based on census tract data, the numbers presented in their report are at the county and state level. Further, they provide statistics for only those counties contained in Metropolitan Statistical Areas (MSAs). A full description of the data and the methodology they employ can be found here on their website.
The map below shows which parts of the country could see large property devaluations and tax base erosion as a result of foreclosure spillovers. The top ten counties ranked in order are: Los Angeles, Ca; Cook County, Il; Kings, NY; Miami-Dade, FL; Queens, NY; Orange, CA; Bronx, NY; Broward, FL; Maricopa, AZ; and New York, NY. Los Angeles county clearly dominates: It’s total devaluation is nearly double that of the second ranked Cook county.
Pan around the map to see the other hotspots, in the Chicago area, the northeast and Florida.
Total Property Devaluation from Foreclosure Spillover Effects
If you are a homeowner, you don’t want to live in the following counties: Kings; NY, Hudson, NY; Queens, NY; Miami-Dade, FL; Bronx, NY; Los Angeles, CA; Manassas Park, VA; Passaic, NJ; New York, NY; and Prince Georges, MD. Those are are the top ten counties ranked by average property value loss per household affected by the spillovers. The map below shows a richer illustration of the geographic aspects of the problem.
Average Decrease in Property Value Per Household Affected
A Slightly Different Look At Things
Where can a single foreclosure be expected to result in the largest impact on property values? To get at this, the study’s numbers on total property devaluation and houses lost due to foreclosures were used to create an index: property tax erosion per foreclosure.
The answer: New York, NY. On average, every foreclosure in this area can be expected to result in a 18.8 million dollar decline in the county’s tax base, due to spillover effects alone! The top ten counties, according to the index, are:
New York, NY ~ $18,824,604
Kings, NY ~ 3,189,975
San Francisco, CA ~ 2,806,025Bronx, NY ~ 2,744,213
Queens, NY ~ 1,801,715
Hudson, NY ~ 1,459,685
Alexandria, VA ~ 1,362,766
District of Columbia, DC ~ 1,127,907
Arlington, VA ~ 1,106,435
Suffolk, MA ~ 1,040,268
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November 13th, 2007 at 7:45 pm
[…] The Spillover Effects of Foreclosures - Moving Past Push Pins Hotspot map shows “which parts of the country could see large property devaluations and tax base erosion as a result of foreclosure spillovers.” (tags: mapping real-estate foreclosure) […]
April 17th, 2008 at 8:27 pm
1 in 9 homes are in some of foreclosure in Riverside County, CA. That means drive down any street and every 4th house either house or the one across the street is in foreclosure. That’s not right.
People were lured in by the easy mortgages and now that music has stopped and there is no place to sit they want the government to help them. That’s just not right.
April 19th, 2008 at 6:25 am
I couldn’t agree more, but it is important to realize that help is always available - it is never too late. But the sooner action is taken, the better. When it comes to foreclosures, time is your enemy.
July 13th, 2008 at 1:01 pm
This is not the lenders fault, everyone knows what the can afford and what they can’t, like buying a car, they may have you looking at a Jaguar XJ and tell you they can finance you, but you know darn well you can’t afford it and that you should be looking at a Hyundai; people need to stop trying to live above their paygrade, so now they have not only hurt themselves by ruining their credit… they’ve hurt entire communities.
thanks