Boomer’s Blog

The trend heading into the holidays seems to be one of growing unemployment and a rising tide of homeowners drowning in mortgage debt.

An Ironic wist on a Familiar Story
The U.S. Bureau of Labor Statistics’ October report finds that unemployment last month soared to a 14-year high of 6.5 percent, as 240,000 jobs were slashed. Yet the Orange County Register’s Mortgage Insider, Matthew Padilla has made an interesting observation. He sifted through the data to report that in September,  352,200 workers were making a living in the mortgage business — that’s up from 349,300 in August.

Negative Equity Plagues Homeowners
But the recent real estate statistics that really capture the real estate investor’s eye come from  First American CoreLogic: 2.1 million mortgages are within 5 percentage points of being in a negative-equity position and 7.5 million mortgaged properties are carrying more mortgage debt than they’re worth. That means that nearly 20 percent of properties with mortgages have plunged into the powerful waves the economic undertow.

Rising Percentage of Underwater Mortgages in the States
See how the mortgages currently in negative equity break down among the states listed below (Note: percentages have been rounded off and the states are listed in descending order starting with the highest reported rate of negative equity.):

1. Nevada: 48%
2. Michigan: 39%
3. Arizona: 29%
4. Florida: 29%
5. California:  27%
6. Georgia: 23%
7. Ohio: 22%
8. Colorado: 18%
9. Arkansas: 16%
10. New Hampshire: 17%
11. Texas: 17%
12. Virginia: 16%
13. Tennessee: 15%
14. Kansas: 15%
15. Iowa: 15%
16. Alaska: 14%
17. Wisconsin: 14%
18. Nebraska: 13%
19. Kentucky: 13%
20. Missouri: 13%
21. Minnesota: 12%
22. Maryland: 12%
23. Rhode Island: 12%
24. Louisiana: 11%
25. Idaho: 11%
26. Utah: 11%
27. Oklahoma: 10%
28. South Carolina: 10%
29. Indiana: 10%
30. North Carolina: 10%
31. Illinois: 10%
32. Delaware: 10%
33. Washington D.C.: 10%
34. Massachusetts: 10%
35. New Jersey: 9%
36. New Mexico: 8%
37. Washington: 8 %
38. Oregon: 8%
39. Alabama: 7%
40. Connecticut: 7%
41. Montana: 7%
42. Pennsylvania: 6%
43. Hawaii:  6%
44. New York:  4%

Source: First American CoreLogic

Notes: Data were unavailable for Maine, Mississippi, North Dakota, South Dakota, Vermont, West Virginia and Wyoming. These data are based on 42 million properties that had a first or second mortgage, accounting for at least  80 percent of U.S. mortgages.

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Forbes.com has surveyed the 40 largest U.S. metropolitan areas and aggregated various data on foreclosure listings, job growth, transaction volumes, vacancy and current inventory rates to build a list of the 10 most ominous real estate markets in the nation.

1. Detroit, Mich.: Here, foreclosures are five times the national average, jobs are few and people are moving away in droves; the economy continues to suffer.
2. Orlando, Fla.: This market has a 7 percent vacancy rate, despite job growth in the past few years. Analysts predict negative growth for this market in 2008.
3. Cleveland, Ohio: Here, a 3 percent foreclosure rate ranks the sixth worst in the U.S. Also, there has been no significant job growth recorded since mid-2006. when the rate rose only 0.1 percent.
4. St. Louis, Mo.: Market values here dropped 20 percent from 2006 to 2007. This year, the foreclosure rate has surpassed 1 percent and job growth continues to stall. Analysts say that the sharp declines, and rock-bottom prices are likely to reduce recovery time — if the local economy holds up.
5. Miami, Fla.: Foreclosures here are the eighth highest in the U.S. and construction-fueled job growth has suffered hard hits in the past two years.
6. Las Vegas, Nev.: Despite stellar construction-based job growth in 2004 — 2005, growth in the past two years has been flat. Dangers here include rising foreclosure rates, high inventory, and threats that the overall economy will worsen.
7. Sacramento, Calif.: Ranked the fifth worst foreclosure market in the U.S. Beyond the 3 percent foreclosure rate, this market also suffers from jobs losses as as the construction-powered economy tapers off. But transaction volumes are up, even if prices are down. Way down. Here, desperate homeowners have set records with their agressive price reductions.
8. Denver, Colo.: Despite strong economic growth over the past four years, and a $240,000 median home price, Denver has experienced 50,000 foreclosures, or nearly 3 percent of the market, thusly earning the ninth-worst foreclosure rate in the nation. This market’s saving grace is reported job growth at three times the national average.
9. Tampa, Fla.: Although this market continues to add residents and remains a popular destination for retirees, inventory remains high and dismal growth in the service-oriented job market doesn’t seem to be helping.
10. Phoenix, Ariz.: With an economy supported by the construction industry and overbuilding, there are 53,000 homes reportedly on the market. This sky-high inventory is five times the 2005 rate, and homes aren’t selling anywhere close to asking prices. Besides holding one of the highest foreclosure rates in the nation, the distressed Alt-A and sub prime loans aren’t contained within one single area as is typical among large metropolitan locales.

Note: These data were culled from the following sources to create the list, which bears more bad news for cities already suffering from high foreclosure rates, job growth stagnation and dwindling tax revenues: Foreclosure listing service; RealtyTrac; job growth: U.S. Bureau of Labor Statistics; transaction volume data: Radar Logic; current inventory rates: U.S. Census Bureau; and multiple listing service (MLS) data: ZipRealty.