Mortgage rates hold fast, still above 5 percent
National average for a 30-year fixed loan is slips slightly to 5.06 percent
Average rates for 30-year fixed mortgages slipped this week, but stayed above 5 percent for the fifth straight week, Freddie Mac said Thursday.
The average rate for 30-year fixed-rate mortgages was 5.06 percent this week, down a tick from 5.07 percent last week. A year ago, 30-year fixed rate mortgages averaged 4.84 percent, Freddie Mac said.
Rates had dropped to a record low of 4.71 percent in December, pushed down by a campaign by the Federal Reserve to reduce borrowing costs for consumers. The program ended at the end of March, but the Fed left the door open to reviving the program if the economy weakens.
The last time rates for 30-year fixed mortgages averaged less than 5 percent was the week of March 25, when they were 4.99 percent.
“These low rates have been helping to moderate house price declines over the course of the year,” said Frank Nothaft, Freddie Mac’s chief economist.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often tracking the interest rate paid on long-term Treasury bonds.
This week, the average rate on a 15-year fixed-rate mortgage was 4.39 percent, unchanged from last week.
Rates on five-year, adjustable-rate mortgages averaged 4 percent, down from 4.03 percent a week earlier. Rates on one-year, adjustable-rate mortgages rose to 4.25 percent from 4.22 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 of a point for 30-year and 15-year loans, 0.6 of a point for 5-year loans, and 0.5 of a point for 1-year loans.
http://www.msnbc.msn.com/id/7148582/ns/business-real_estate/#storyContinued
Foreclosure easing in big cities but still spreading
By Les Christie, staff writerApril 29, 2010: 12:10 PM ET
NEW YORK (CNNMoney.com) — Foreclosure filings declined in more than half of the country’s worst-hit spots in the first three months of 2010. But that doesn’t mean the healing has begun.
In a release issued Thursday, RealtyTrac, a leading online marketer of foreclosed homes, reported that foreclosure filings declined in 14 of the top 20 cities year-over-year, most of which are concentrated in the Sunbelt “bubble” states of California, Arizona, Florida and Nevada.
But the improvement during the first quarter, compared with 12 months earlier, may have been a statistical glitch, not evidence of a real trend.
“The decreasing foreclosure activity in some of the nation’s top foreclosure hot spots in the first quarter is not a sure signal that those areas are out of the woods yet,” said RealtyTrac CEO James Saccacio.
Plus, those improvements bucked the market’s general trend: Nationwide foreclosures rose 16% during the quarter.
Saccacio attributed much of the improvement to government-led foreclosure prevention programs, especially a new program encouraging banks to facilitate short sales. Those are transactions in which sellers, with lender approval, sell their homes to third parties for less than what they owe on the mortgage.
Banks have figured out that short sales are less costly to them than foreclosures because they save on a long list of expenses, including legal fees, taxes and maintenance, and brokers’ commissions.
“Lenders take about twice the hit on a foreclosure as on a sort sale,” said Rick Sharga, a RealtyTrac spokesman.
California cities accounted for half of the top 20 metro areas for foreclosure filings, but Las Vegas claimed the number one position. It had one foreclosure filing for every 28 households during the quarter, roughly five times the national average of one filing for every 128.
The Sin City news is a mixed bag: Filings are 13% worse than in the last three months of 2009, but 19% better than in the first three months of 2009.
The second hardest hit metro area was Modesto, Calif., with a rate of one filing for every 34 homes, down more than 13% year-over-year. Cape Coral, Fla., was third, with one in 35, down 26% year-over year. Tied for fourth at one for every 36 homes were Riverside, Calif., (down 19%) and Stockton, Calif., (down 25%).
Los Angeles, the nation’s second largest metro area, recorded 59,293 filings during the quarter, more than any other metro area, but its rate of one for every 75 households made it only the 32nd hardest hit U.S. market.
Miami had the steepest year-over-year increase for any top 20 market. There were over 71% more filings during the first quarter of 2010 than it recorded during the same quarter in 2009. 
The Best Places for Business and Careers
Saturday, April 24, 2010provided by
Cities like Des Moines, Iowa; Provo, Utah; and Fort Collins, Colo.; lead our 12th annual list of areas with the most economic opportunity.
The Great Recession ravaged almost every big city across the United States in 2009. Home prices were down in 182 of the 200 largest metro areas, while household incomes fell in 94% of these areas. The employment picture was even tougher: only four areas posted positive job growth with a paltry gain of just 4,300 positions created–combined. The other 196 metros together lost 3.5 million jobs last year.
The worst may be over, but businesses on both coasts still face outrageous costs and indebted state governments with budget shortfalls that will have to be filled from the flesh of local firms. Those problems won’t be resolved anytime soon.
What to do? Our 12th annual ranking of the Best Places for Business and Careers has an answer: Move to Middle America.
The top of this year’s list is filled with cities in so-called flyover states, areas with reasonable business costs, strong economic outlooks and a solid quality of life.
Leading the way is Des Moines, Iowa, which grabbed our top spot after ranking seventh last year. Iowa’s capital has 562,000 people in the metro area and features business costs 15% below the national average (living costs are 10% below the national average). It has an educated labor supply as 33% of adults have college degrees (ranking 46th among the 200 largest metros) and 92% possess high school diplomas (ranks 19th).
“Des Moines’ favorable regulatory environment and well-educated workforce makes it an attractive destination for high-value-added, well-paying industries,” says Sunayana Mehra, an economist at Moody’s Economy.com. The financial industry has set up shop in Des Moines, with Wells Fargo (NASDAQ: WFC – News) and Principal Financial being the largest employers in the area with 19,000 employees between them. Other big employers include insurers Nationwide Insurance and Marsh & McLennan.
The economic outlook is bright in Des Moines as well. Employment is expected to increase at a 2.7% annual clip over the next three years, 10th best in the country. Meanwhile, household incomes are projected to rise 2.9%, which ranks 11th.
Des Moines city manager Richard Clark points to the area’s quality of life as a big draw for corporations. Housing is affordable with a median home price of just $149,000, one-quarter the price of a home in the San Francisco area. Commute times, according to the Census Bureau, average 19.8 minutes, one of the fastest in the U.S.
Getting outside is easy, too. Des Moines designed a system of more than 300 miles of trails in and around the city for running, walking, biking or in-line skating. A 4.4-acre public park and sculpture garden opened downtown in September. Local venture capitalist John Pappajohn and his wife Mary donated $40 million of sculptures to the project from their personal collection. The park is surrounded by the offices of Wellmark Blue Cross Blue Shield, Nationwide and ING (NASDAQ: ING – News).
Our ranking of Best Places looks at the 200 largest metropolitan statistical areas in the U.S., which range in size from the New York City metro, with 11.7 million people, to Merced, Calif., home to 245,000. We ranked areas on 12 metrics including costs (business and living), job growth (past and projected), income growth, educational attainment and projected economic growth.
We also factored in quality-of-life issues like crime, cultural and recreational opportunities as well as net migration patters. Lastly we examined the percentage of subprime mortgages handed out over a three-year stretch and the number of highly ranked four-year colleges in the area, per our annual college rankings.
Most of the figures used were provided by research firm Moody’s Economy.com. Data for crime (FBI) and educational attainment (Census) came straight from the government. Demographer Bert Sperling created a culture and leisure index for Forbes.
Last year’s winner, Raleigh, N.C., dropped to third this year. The long-term outlook in Raleigh is still strong, but 2009 was rough. Incomes fell 5.9% and unemployment averaged 8.6% for the year, compared with 4.9% in 2008. “The recession has hit the area hard, with the restructuring in the pharmaceutical industry and with dry credit markets greatly reducing access to financing for startup firms,” says Economy.com economist Jimmy Jean. Six North Carolina metros ranked in the top 20 last year, but this year only Raleigh and Charlotte made the cut.
Looking at California metros shows both the good and the bad the state has to offer. California cities Modesto, Vallejo and Merced occupy the bottom three spots in our rankings. All three areas have seen net migrations out of the cities over the past five years and were hit hard by the housing crisis. Each metro has a significant number of subprime mortgages on the books.
The top Golden State locales were San Francisco (ranked 38th) and San Jose (ranked 48th). Economy.com figures that San Fran and San Jose are the two most expensive cities in the country in terms of living costs. Business costs for both are also in the top five. Yet the Bay Area and Silicon Valley are able to overcome these onerous costs thanks to a strong university presence and an abundance of cultural and recreational opportunities that attract a highly educated labor supply. The economies of both areas are expected to be among the 10 most vibrant over the next three years with annual gross metro product growth of 5.8% in San Jose and 5.7% in San Francisco.
The Best Places for Business and Careers
Our 12th annual ranking of the Best Places for Business and Careers looks at the 200 largest metro areas, which range in size from the New York City metro with 11.7 million people to Merced, Calif., which is home to 245,000. We ranked areas on 12 metrics including costs (business and living), job growth (past and projected), income growth, educational attainment and projected economic growth. We also factored in quality of life issues like crime, cultural and recreational opportunities as well as net migration patters. Lastly we examined the percentage of subprime mortgages handed out over a three-year stretch and the number of highly ranked four-year colleges in the area.
1. Des Moines, IA
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Metro Area Population: 563,000
Cost of Doing Business Rank Rank*: 49
Economic Growth Projected Rank**: 53
Educational Attainment Rank***: 46
Income Growth Rank****: 54
Job Growth Projected Rank**: 29
Net Migration Rank****: 45
2. Provo, UT
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Metro Area Population: 556,000
Cost of Doing Business Rank Rank: 20
Economic Growth Projected Rank: 21
Educational Attainment Rank: 38
Income Growth Rank: 1
Job Growth Projected Rank: 10
Net Migration Rank: 39
3. Raleigh, NC
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Metro Area Population: 1,126,000
Cost of Doing Business Rank Rank: 22
Economic Growth Projected Rank: 24
Educational Attainment Rank: 12
Income Growth Rank: 179
Job Growth Projected Rank: 5
Net Migration Rank: 3
4. Fort Collins, CO
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Metro Area Population: 298,000
Cost of Doing Business Rank Rank: 34
Economic Growth Projected Rank: 37
Educational Attainment Rank: 11
Income Growth Rank: 42
Job Growth Projected Rank: 51
Net Migration Rank: 37
5. Lincoln, NE
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Metro Area Population: 298,000
Cost of Doing Business Rank Rank: 14
Economic Growth Projected Rank: 95
Educational Attainment Rank: 30
Income Growth Rank: 36
Job Growth Projected Rank: 60
Net Migration Rank: 97
6. Denver, CO
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Metro Area Population: 2,552,000
Cost of Doing Business Rank Rank: 113
Economic Growth Projected Rank: 85
Educational Attainment Rank: 22
Income Growth Rank: 62
Job Growth Projected Rank: 64
Net Migration Rank: 54
7. Omaha, NE
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Metro Area Population: 850,000
Cost of Doing Business Rank Rank: 48
Economic Growth Projected Rank: 128
Educational Attainment Rank: 56
Income Growth Rank: 46
Job Growth Projected Rank: 54
Net Migration Rank: 104
8. Huntsville, AL
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Metro Area Population: 406,000
Cost of Doing Business Rank Rank: 112
Economic Growth Projected Rank: 3
Educational Attainment Rank: 37
Income Growth Rank: 72
Job Growth Projected Rank: 18
Net Migration Rank: 16
9. Lexington, KY
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Metro Area Population: 471,000
Cost of Doing Business Rank Rank: 25
Economic Growth Projected Rank: 139
Educational Attainment Rank: 39
Income Growth Rank: 110
Job Growth Projected Rank: 93
Net Migration Rank: 59
10. Austin, TX
 Walter Bibikow/Getty Images |
Metro Area Population: 1,705,000
Cost of Doing Business Rank Rank: 160
Economic Growth Projected Rank: 2
Educational Attainment Rank: 19
Income Growth Rank: 100
Job Growth Projected Rank: 2
Net Migration Rank: 6
* Index based on cost of labor, energy, taxes and office space.
** 3-year annualized figure.
*** Share of Population over age 25 with a bachelor’s degree or higher.
**** 5-year annualized figures.
Sources: Moody’s Economy.com; Sperling’s BestPlaces; FBI; U.S. Census.
Click here to see full list of The Best Places for Business and Careers
The Busted Homes Behind a Big Bet
Friday, April 23, 2010
provided by
ABERDEEN TOWNSHIP, N.J. — The government’s civil-fraud allegation against Goldman Sachs (NYSE: GS, News) Group Inc. centers on a deal the firm crafted so that hedge-fund king John Paulson could bet on a collapse in U.S. housing prices. It was a dizzyingly complex transaction, involving 90 bonds and a 65-page deal sheet. But it all boiled down to whether people like Stella Onyeukwu, Gheorghe Bledea and Jack Booket could pay their mortgages.
They couldn’t, and Mr. Paulson made $1 billion as a result.
Mr. Booket, a 44-year-old heating and air-conditioning repairman, owed $300,000 on his three-bedroom home in Aberdeen Township. His house was one of thousands that wound up in a pool of mortgages that were referenced in the so-called collateralized debt obligation, or CDO, which Goldman created for Mr. Paulson. The hedge-fund manager invested heavily in a form of insurance that could yield huge gains if the borrowers grew unable to pay.
In 2006, Mr. Booket got hit by a car while riding a motorcycle from a late-night party, was unable to find much work and couldn’t pay the bank. In October 2008, he lost the house to foreclosure and plans to move out by next week. He says he bears no grudge against Mr. Paulson and Goldman.
“The man came up with a scheme to get rich, and he did it,” says Mr. Booket, who had refinanced his mortgage just months before the accident. “So more power to him.” More than half of the 500,000 mortgages from 48 states contained in the Goldman deal — known as Abacus 2007-AC1 — are now in default or foreclosed.
Mr. Paulson didn’t have any direct involvement in the mortgages contained in the Goldman deal under scrutiny by the Securities and Exchange Commission. And the bets that Mr. Paulson placed on Abacus didn’t affect whether or not homeowners defaulted. Rather, he used Wall Street to help structure hugely lucrative side bets that homeowners such as Mr. Booket couldn’t make their monthly mortgage payments.
One loser in the deal, German bank IKB Deutsche Industriebank AG, saw most of its $150 million Abacus investment evaporate. It had believed that borrowers broadly could afford the loans. The bank says it is cooperating with the SEC’s inquiry.
“There’s no question we made money in these transactions,” said a Paulson spokesman in a statement. “However, all our dealings were through arms-length transactions with experienced counterparties who had opposing views based on all available information at the time. We were straightforward in our dislike of these securities but the vast majority of people in the market thought we were dead wrong and openly and aggressively purchased the securities we were selling.” Some of the people whose mortgages underpinned Mr. Paulson’s wager were themselves taking a gamble — that U.S. housing prices would continue to march upward, making it possible for them to eventually pay off loans they couldn’t afford. The Wall Street Journal identified homeowners in the Abacus portfolio by taking the 90 bonds listed in a February 2007 Abacus pitchbook and matching them with court records, foreclosure listings, title records and loan servicing reports. The bonds contained nearly 500,000 mortgage loans.
One mortgage in the Abacus pool was held by Ms. Onyeukwu, a 43-year-old nursing-home assistant in Pittsburg, Calif. Ms. Onyeukwu already was under financial strain in 2006, when she applied to Fremont Investment & Loan for a new mortgage on her two-story, six-bedroom house in a subdivision called Highlands Ranch. With pre-tax income of about $9,000 a month from a child-care business, she says she was having a hard time making the $5,000 monthly payments on her existing $688,000 mortgage, which carried an initial interest rate of 9.05%.
Nonetheless, she took out an even bigger loan from Fremont, which lent her $786,250 at an initial interest rate of 7.55% — but that would begin to float as high as 13.55% two years later. She says the monthly payment on the new loan came to a bit more than $5,000. She defaulted in early 2008 and was evicted from the house in early 2009. Fremont didn’t respond to requests for comment.
In early 2007, Paulson was identifying different bonds from across the country that it wanted to place bets against. Paolo Pellegrini, Mr. Paulson’s right-hand man, began working with Goldman trader Fabrice Tourre to choose bonds for the Abacus portfolio, say people familiar with the deal.
Abacus was a “synthetic” CDO, meaning that it didn’t contain any actual bonds. Rather, it allowed Paulson’s firm to buy insurance on bonds it didn’t own. If the bonds performed well, Paulson would make a steady stream of small payments—much like insurance premiums. If they performed poorly, Paulson would receive potentially large payouts.
According to the SEC complaint, Mr. Paulson especially wanted to find risky subprime adjustable-rate mortgages that had been given to borrowers with low credit scores who lived in California, Arizona, Florida, and Nevada—states with big spikes in home prices that he reckoned would crash.
Mr. Pellegrini and a colleague had purchased an enormous database capable of tracking the characteristics of more than six million mortgages in various parts of the country. They spent long hours scouring it all, according to people familiar with the matter.
The home mortgage of Gheorghe Bledea was among those that wound up in the Abacus portfolio. In May of 2006, a broker had approached Mr. Bledea, a Romanian immigrant, to pitch him a deal on a loan to refinance the existing mortgage on his Folsom, Calif., home. Mr. Bledea, who is suing his lender in Superior Court of California in Sacramento on allegations that he was defrauded, wanted a 30-year fixed-rate loan, according to his complaint. His broker told him the only one available was an adjustable-rate mortgage carrying an 8% interest rate, according his court filing. Mr. Bledea, who says he has limited English-speaking skills, was told that he’d be able to exit the risky loan in six months and refinance into yet another one carrying a lower 1% rate. Mr. Bledea agreed to take out the $531,000 loan on July 21, 2006. The new loan never materialized. Within months, Mr. Bledea and his family were struggling under the weight of a $5,800 monthly note, says his son, Joe Bledea. We were putting ourselves in a lot of debt,” Joe Bledea says. By spring of 2009, the loan was in default. The elder Mr. Bledea is now appealing to the court to avoid eviction from his ranch-style house, says family attorney Will Ramey. The loan, underwritten by Washington Mutual, itself had moved through the U.S. mortgage machine. It was put into a debt pool, or residential-mortgage backed security, with the arcane name of Long Beach Mortgage Loan Trust 2006-8. A spokesman for J.P. Morgan Chase & Co., which acquired WaMu in September of 2008, said the bank was unable to comment on the loan. By mid-October of 2007, just seven months after Abacus was formed, 83% of the bonds in its portfolio had been downgraded. By then, sheriff departments across the U.S. were seizing homes and putting them up for sale at public auction as souring Abacus-related loans metastasized.
In Dayton, Ohio, a two-story home that served as collateral for Abacus now stands empty. The house was purchased for $75,000 in 2006 by a borrower who used a subprime loan from a California-based mortgage bank. That $67,500 loan was placed into a pool called Structured Asset Investment Loan Trust 2006-4, which underpinned Abacus. After the borrower defaulted, the trust acquired the home through foreclosure in October 2007 and resold it to an investor in April 2008 for $7,500, a tenth of the price paid two years before.
Neighbor Lonnie Ross, sitting on the porch Tuesday morning while enjoying a cigarette, says most homes on the block are vacant or occupied by squatters.
Inside the unoccupied house, which is missing its front door knob, hardwood floors are strewn with old bills. A fake Christmas tree is still decorated with candy canes. Instant pudding and other discarded food litters the kitchen. Dirty dishes are soaking in a sink.
A few blocks away, a homemade sign reads: “This community is dead already. We need leadership to rebuild this community. Too many run down houses need to be torn down.”
But not all homes have gone south. In a wealthy Denver neighborhood, neighbors are thrilled that Joel Champagne rescued a house on East Alameda Circle, where a previous mortgage was contained in the Abacus deal via a pool called First Franklin Mortgage Loan Trust 2006-FF9. Mr. Champagne bought the home last year for $370,000. The prior owner, according to title records, had paid $1.2 million, borrowing the entire amount from First Franklin. The owner had started on a renovation and then vanished, says Mr. Champagne and neighbors, leaving the home with no plumbing, wiring or roof shingles. Today, kids’ chalk drawings are scrawled across the drive and hyacinths are starting to peep through the flower beds. “I’m very fortunate. We capitalized on the market and we were very fortunate to be in a position to do that,” says the 45-year- old. “I don’t know enough details to say if I’m upset with Goldman Sachs or whoever. The problem’s bigger than that. Everyone made a lot of mistakes back then.
– Stephanie Simon, James R. Hagerty, Serena Ng, Cari Tuna contributed to this article.
10 Cities Facing a Double Whammy of Default Risks
By Luke Mullins
Posted: April 23, 2010
Nearly four years after the real estate market peaked, an alarming number of Americans remain in danger of losing their homes. A non-seasonally adjusted 15 percent of home mortgages were either delinquent or in foreclosure at the end of the fourth quarter of 2009, according to the Mortgage Bankers Association. That’s the highest-ever tally in the history of the MBA’s National Delinquency Survey.
Mike Larson of Weiss Research points to two key factors behind these high delinquencies. Sharply falling real estate values have put about 21 percent of homeowners underwater, meaning that they owe more on their mortgage than their home is worth. Property owners in this position—which is also known as having negative equity—may find it in their best interest to simply walk away from the home (even, in some cases, when they can afford to make their monthly payments). At the same time, an uncomfortably high national unemployment rate of 9.7 percent means that many Americans won’t have the income they need to pay their bills.
[Slide Show: 10 Cities Facing Double-Whammy Defaults.]
Today, some particularly hard-hit markets are in the unenviable position of having both elevated unemployment and high concentrations of negative equity. “Clearly, those are the markets where you are going to see some of the worst metrics on the foreclosure side,” Larson says. “You are going to see a lot of people walking away [and] you are going to see a lot of distressed inventory that’s being dumped on the market.” To pinpoint housing markets that are facing these twin default risks, U.S. News compared negative equity data from Zillow with unemployment figures from Moody’s Economy.com. (All data refers to the fourth quarter of 2009.) Based on this data, here is a look at 10 cities that face a double whammy of default risks.
[See How Strategic Defaults Are Reshaping the Economy.]
1. Las Vegas: Speculators and exotic loans pushed home prices in this gambling Mecca dramatically higher during the first half of the previous decade. But after peaking in 2006, the real estate market’s crash cleaned out investors and submerged an alarming portion of area homeowners. Through the fourth quarter of 2009, more than 81 percent of single-family home mortgages in Las Vegas were underwater. Meanwhile, the implosion of the housing sector has hammered the local labor market, says Larry Murphy, the president of SalesTraq. When the housing market was sizzling, construction emerged as a key job provider for Las Vegas residents. But as home prices tumbled, the jobs disappeared. “When the housing market goes in the tank, the construction market goes in the tank,” Murphy says. “Then you have unemployment and those people can’t buy [property] and so it’s kind of like a death spiral.” The unemployment rate in Las Vegas reached 13 percent in the fourth quarter of last year.
2. Merced, Calif.: California residents looking for alternatives to pricey big cities helped send home prices surging in places like Merced during in the early to middle parts of the last decade. Real estate values in this city of 77,000 residents, which is located east of San Francisco, increased at monster rates before running out of steam in 2006. The proliferation of exotic, adjustable-rate mortgages played a key role in this development, says John Walsh, the president of DataQuick. But the subsequent crash dragged more than 64 percent of area homeowners underwater through the fourth quarter of 2009. And the impact of the real estate bust stretched beyond home prices. “You go to places like Merced and you’ve got a real significant percentage of the population [that] was involved in either home building, home financing, or home sales,” Walsh says. “And all of the sudden all three pieces of those are gone.” As a result, Merced’s unemployment rate stood at 19 percent through the fourth quarter of 2009.
3. El Centro, Calif.: The same forces that upended Merced’s housing and labor markets also hammered the city of El Centro, Walsh says. Residents looking for a cheaper alternative to nearby San Diego moved to El Centro, increasing home prices in this city of 40,000, Walsh says. But when home prices crashed, nearly 57 percent of homeowners found themselves underwater through the fourth quarter of 2009. And without real estate-related industries churning out jobs, the unemployment rate has hit nearly 30 percent.
4. Port St. Lucie, Fla.: The housing market in Port St. Lucie, located on the southeast coast of Florida, experienced one of the most aggressive pricing booms in the state, says Jack McCabe of McCabe Research & Consulting. But the run-up in real estate values wasn’t underpinned by growth in population or jobs. “These were markets that were heavily dominated by investor flippers, speculative flippers,” McCabe says. “They had no intention of ever occupying the property.” When prices crashed, more than 55 percent of single-family homeowners found themselves underwater through the fourth quarter of 2009. And as stagnant sales undercut the housing sector’s ability to create jobs, area unemployment reached 14 percent.
5. Fort Myers, Fla.: Over on Florida’s west coast, the housing market in Fort Myers experienced a similar phenomenon. An aggressive boom-and-bust cycle has handed negative equity positions to 55 percent of single-family homeowners. And like other housing-boom hotspots, the pain hasn’t been limited to real estate values. “We had extremely low unemployment during the boom years because it was all construction jobs,” McCabe says. “There was no industry growth and there was no company growth. These were all real estate-related businesses—brokers, title companies, appraisers, and on and on.” After the housing euphoria subsided, many employees of real estate-related companies lost their jobs. Unemployment in the Ft. Myers area hit 14 percent in the fourth quarter of 2009.
6. Bend, Ore.: Vacation home buyers, speculative investors, and unique land-use laws worked to drive home prices in Bend sharply higher during the housing boom, says Lester Friedman, president-elect of the Central Oregon Association of Realtors. But as the market petered out, prices headed south in a hurry. “When the market turned, all of a sudden instead of multiple bidders, you’ve got multiple sellers and very few buyers,” Friedman says. Declining real estate values dragged nearly 41 percent of Bend’s homeowners underwater. Meanwhile, the housing bust hit the local economy by eroding demand for wood products, an industry that expanded swiftly as real estate values climbed, according to Celia Chen of Moody’s Economy.com. Friedman notes that weakness in the tourism sector, which slowed along with the broader economy, has also helped lead to an unemployment rate that topped 14 percent in the fourth quarter of 2009.
7. Ocala, Fla.: The central Florida community of Ocala, which is located north of Orlando, is in the same precarious position as the coastal cities of Port St. Lucie and Fort Myers. Thirty-six percent of homeowners in Ocala are underwater, and area unemployment stood at 14 percent in the fourth quarter of last year. “All throughout Florida—from one coast to the other and in between—the market was overdeveloped and overbuilt,” McCabe says. “And that includes the Ocala market.”
8. Detroit: A number of cities located outside of the housing-boom hotspots are also facing the twin dangers of high unemployment and negative equity. The erosion of its traditional manufacturing industrial base has helped drive unemployment in the Detroit area to more than 16 percent through the fourth quarter of 2009, Chen says. “And at the same time, there was some very aggressive lending going on during the housing bubble,” Chen says. “So many buyers were getting credit who probably shouldn’t have gotten credit.” High unemployment and exotic home loans have combined to drag nearly 26 percent of area homeowners underwater through the fourth quarter of 2009.
9. Rockford, Ill.: These same forces have worked to land Rockford—a city of 157,000 located in northern Illinois—in a comparable fix, Chen says. Local unemployment hit 16 percent in the fourth quarter of 2009. “The Midwest did go into the recession earlier than the rest of [the country], so the situation has been eroding for a longer period of time,” Chen says. At the same time, more than 22 percent of homeowners had negative equity in the final three months of last year.
10. Toledo, Ohio: The housing market in Toledo also faces high unemployment and negative equity. In the fourth quarter of 2009, local unemployment stood at more than 12 percent and roughly 28 percent of homeowners had negative equity. As was the case for Rockford and Detroit, Chen fingered the disappearance of manufacturing jobs and the proliferation of risky mortgages for Toledo’s housing headaches.
