When there is no more room in housing market hell, zombie foreclosures will dot the earth.
According to real estate analysis firm RealtyTrac, one in every five homes in the foreclosure process (more than 152,000 in total) is sitting vacant. Abandoned by the distressed homeowner and not yet repossessed by the foreclosing lender, these homes have no one to maintain them, are falling into disrepair, attracting crime and dragging down the values of nearby homes.
As RealtyTrac Vice President Darren Bloomquist notes, zombie foreclosures sap tax dollars from county governments and hang over the head of former homeowners who in many cases don’t even know they’re still responsible for the property. Banks aren’t helping, largely because they don’t want to complete the foreclosure process and take on low-value homes that may never recuperate the loans in foreclosure. Missing homeowners aren’t making it any easier, as fast-tracking zombie foreclosures is only possible when there’s a homeowner to serve with proper foreclosure notices.
So, Walking Dead watchers, how do you handle a zombie? Well, just about no zombie narrative outside of South Park advises this method, but you can try to cure it. If a new homeowner is interested in buying the property and fixing it up, that rotting corpse of a home returns to its lucid state of lawn mowing, window fixing and other maintenance that improves the home and its value. Wooing that buyer with a short sale that lets the home go for less than the mortgage owed usually accomplishes this by giving the new owner some extra cash and equity to work with.
That largely depends on the level of infestation., though As a study sponsored by Harvard University determined, the "gut" rehab performed on zombie foreclosures in Cleveland for decades is "not financially viable for most Cleveland neighborhoods." Instead, "demolition will likely remain the predominant means of blight removal and market stabilization." Yep, detaching the head and destroying the brain to save every living thing in the immediate vicinity.
With 17 million people in the U.S. planning to buy a home this year, that cure option is still on the table. But with the median home sale price already rising past $180,000 and interest rates rising, full rehab projects aren’t quite the discount they were during the depths of the housing crisis.
We took a look at RealtyTrac’s figures and found five metropolitan areas facing hordes of zombie foreclosures. While each of these locations would love to bring those properties back to life, a more bloody solution may be required:
5. Orlando-Kissimmee, Fla.
Total vacant foreclosures: 5,560
Percentage of all foreclosures: 21%
There are cities with a higher percentage of vacant foreclosures out there — Jacksonville (30%), Palm Bay-Melbourne (30%) and Las Vegas (33%) — but none have as many abandoned homes as The Vacation Capital of the World.
In fairness, however, Orlando-Kissimmee’s home state of Florida has 54,908 vacant foreclosure total. That’s a ghost town bigger than Titusville, Fla., and roughly the size of Fond du Lac, Wis. Those houses tend to stay in foreclosure for a good, long time, too, with Florida’s 1,095-day foreclosure length trailing just Hawaii (1,112 days) and Arkansas (1,128).
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The good news is that Florida’s foreclosure rates have decreased each month for the past year, with foreclosure auctions down 2% from last February. Still, Orlando-Kissimmee has its issues. Its foreclosure rate is the sixth-highest in the U.S. in February, with one in every 370 housing units in foreclosure.
4. Tampa, St. Petersburg and Clearwater, Fla.
Total vacant foreclosures: 10,446
Percentage of all foreclosures: 28%
That whopping 28% is tops on our list and not surprising considering how hard the housing crisis hit the greater Tampa area.
We’re not just talking about superficial nonsense such as Buccaneers and Rays attendance, but underwater mortgages and lost homes. The Tampa/St. Pete/Clearwater area led the nation in foreclosures in February, with one out of every 318 housing units going into foreclosure.
For this area, that’s actually a good thing. That foreclosure rate is down 20% from the same time last year and has been showing steady progress for the last year. The overall picture still isn’t great, but it’s improving.
3. New York City, Northern New Jersey and Long Island, N.Y. and N.J.
Total vacant foreclosures: 11,000
Percentage of all foreclosures: 12%
The suburbs got slammed during the housing crisis, but Superstorm Sandy didn’t exactly help matters.
New York and New Jersey rank among the Top 5 states for vacated foreclosures. There are 10,880 in New York state alone, while New Jersey contributes 8,595 to the total. Both are still struggling mightily, with New Jersey’s foreclosure starts up 126% from last year and New York foreclosures spending 1,037 days in that state.
Unlike much of the rest of the nation, however, New Jersey and New York saw increases in bank home repossessions in February. Those seizures more than doubled in New York (up 108% from February 2013) while New Jersey repossessions jumped 90%.
Far from escaping the housing crisis, New Jersey saw its foreclosure rate soar to one out of every 736 homes — its highest level since 2005. Altogether, the New York Metro Area saw foreclosures increase 77.4% from February of last year as homeowners hit by the economy and weather see their homes slip beyond their grasp.
2. Chicago-Naperville-Joliet, Ill.
Total vacant foreclosures: 12,919
Percentage of all foreclosures: 19%
Illinois’ 15,512 foreclosures trail only Florida’s total, with the overwhelming majority falling within that Chicago-Naperville-Joliet triangle.
Even Illinois’ good news isn’t great. Its foreclosure rate has been slashed 48% since last year, but the state still has the fifth-highest foreclosure rate in the country. One in every 811 homes in Illinois filed for foreclosure in February.
The future of this state’s housing market largely depends on the angle you’re viewing it from. The optimist sees Chicago-Naperville-Joliet’s foreclosure rate dropping 47% from last February and sees a whole lot of hope. The pessimist sees 19% of foreclosures unoccupied and wonder who’s going to fill in those cracks.
1. Miami, Ft. Lauderdale and Pompano Beach, Fla.
Total vacant foreclosures: 14,611
Percentage of all foreclosures: 17%
Our last stop in Florida takes us to Miami and other points south, which have served as poster children for the housing crisis and probably aren’t thrilled to see their names at the top of yet another one of these lists.
All those Miami residents, retirees and snowbirds should take heart, however. That stockpile of abandoned homes may be as large as a small town, but the region’s foreclosures have dropped 33% since last February.
There’s still one foreclosure filing for every 328 homes in that area — trailing only Tampa and Jacksonville — but that’s improvement nonetheless. It should also be considered a sign of just how deep the bottom was for Florida’s real estate collapse.
This article was republished with permission from TheStreet.