Buried beneath headlines the past few months about the “fiscal cliff” and sequestration was at least one nugget of positive information for the U.S. economy: Foreclosure starts declined in the fourth quarter of 2012.
Home mortgage foreclosure rates have been a key indicator in the U.S. economic recovery. Foreclosures hit a five-year low in October, according to Lender Processing Services and HOPE NOW. In December, 3.4% of mortgaged homes were in foreclosure, down from 4.2% in December 2011. Rates in each state vary according to local economic conditions.
States with the highest percentages of homes in foreclosure are in the Northeast, Northwest and Florida. In December, Florida had the nation’s highest rate of homes in foreclosure at 11.6%. In December, Florida’s unemployment rate was 7.9%, just above the U.S. rate of 7.8%.
States with the lowest percentages of homes in foreclosure are in the Plains States. At 0.5%, Wyoming had the lowest rate of homes in foreclosure in December; the unemployment rate was 4.9%. Low population density and a rural environment may also contribute to the low rate.
Delinquency rates are another key economic indicator. As the economy improves, delinquency rates have declined. For example, in December 2011, 7.89% of mortgage holders were delinquent, decreasing to 7.17% in December 2012.
States with the highest delinquency rates are in the South and East. Mississippi had the highest percentage of mortgage delinquencies in December with 13.8%. The state has a relatively high unemployment rate of 8.9%. According to Esri, a geographic information systems company, the 2012 median home value in Mississippi is $124,767, one of the nation’s lowest. The high delinquency rate is probably due to economic factors other than unemployment, and may also be related to declining household income and depressed home values.
The lowest delinquency rates are found in Montana, North Dakota, South Dakota, Oregon, Idaho and Wyoming. In December, North Dakota had the nation’s lowest mortgage delinquency rate at 2.4%, coupled with a very low unemployment rate of 3.2%. A recent economic surge due to oil fracking and wind industry projects has boosted home values and demand for housing in many areas of the state.
Vacancy rates are another indicator of economic health. Areas with high vacancy rates include northern Maine, Michigan and Minnesota, as well as parts of Colorado, Idaho and Alaska. At 22.9%, Maine has the nation’s highest vacancy rate due in part to the large number of vacation homes that are vacant for much of the year. High vacancy rates may also include homes that cannot be sold or rented because of economic conditions. Connecticut has the lowest vacancy rate at 8%.
Why this matters
Knowing where high rates of home foreclosures, delinquencies and vacancies are located is key information to help businesses identify opportunities. Areas still struggling with high foreclosure rates are not potential markets for developers and residential construction companies. Conversely, home remodeling, home improvement and maintenance companies may find opportunities when houses are “short-sold” to new owners. The government can also use this information to implement mortgage retention services in areas of high delinquencies/foreclosures to help struggling homeowners keep their homes. Everyone benefits when people own their homes and want to take care of them.
Pam Allison is a digital media, marketing strategist and location intelligence consultant. You can visit her blog at www.pamallison.com.