HUD’s Regional Housing Scorecard Spotlights

Beginning in June 2010, HUD and the U.S. Department of the Treasury have jointly issued monthly “scorecards” on the nation's housing market. These scorecards have incorporated key national housing market indicators to show the depth of the housing crisis historically and have highlighted the effects of the administration's unprecedented efforts to stabilize the housing market and aid its recovery. These efforts, launched in April 2009, have included assistance to homeowners through the Federal Housing Administration’s programs, the Home Affordable Modification Program (HAMP), assistance to communities through the Neighborhood Stabilization Program, and assistance to states through Hardest Hit Fund grants, which are awarded where the crisis has been especially severe.

Atlanta, GA skyline.
Not surprisingly, the foreclosure crisis has played out differently in various areas of the country. The industrial Midwest, along with several central and southern plains states, started out in 2004 with high foreclosure rates exacerbated by economic distress, while the so-called “sand states” of Arizona, California, Florida, and Nevada, along with several upper plains states, had strong economies and foreclosure rates well below the national average. Home prices in the sand states increased rapidly through the end of 2005, whereas the industrial Midwest states missed the upside of the housing bubble and had the lowest rates of housing price appreciation before 2006. Nevertheless, these Midwestern states experienced subsequent severe declines in house prices that were nearly as great in percentage terms as those in the sand states.

By the end of 2006, as the national foreclosure crisis was becoming evident, foreclosure starts increased most dramatically in the sand states. Foreclosures also increased in the industrial Midwest; however, those increases were initially less dramatic because foreclosure rates there were high before the crisis began.

To reflect these regional differences in how the foreclosure crisis was experienced, HUD developed a new regional scorecard spotlight, a bimonthly addendum to the national scorecard, to provide contextual depth. Each featured metropolitan area faced different circumstances before the housing crisis hit, and each has applied different strategies and responses to the foreclosure problem. The five hard-hit metropolitan statistical areas (MSAs) that have been the subject of regional scorecard spotlights to date are Phoenix, Riverside, Cleveland, Atlanta, and Tampa.

The first regional scorecard spotlight, released with the May 2011 edition of the national scorecard, featured the Phoenix-Mesa-Glendale MSA. The Phoenix MSA was not only one of the hardest-hit areas, but it was also typical of how the crisis unfolded in the four sand states. Going into the crisis Phoenix experienced rapid population growth, high levels of new home construction, high use of subprime loans to finance home purchases, and rapidly rising home prices. After the bubble burst, the foreclosure rate rose, and home prices fell dramatically. Many new home subdivisions were left only partially complete as builders lost their financing or went bankrupt. Population in-migration abruptly halted.

The mortgage crisis in the Riverside-San Bernardino-Ontario MSA and in many other parts of California is unique - both in magnitude and severity. The crisis in Riverside's housing market, with much lower property values and many severely underwater mortgages, was the result of several years of rapidly rising home prices supported by widely available, but unsustainable, adjustable-rate mortgages.

As noted above, the foreclosure crisis in the Cleveland MSA and other parts of the industrial Midwest developed much earlier than in other areas of the nation. As early as 2003, the Cleveland MSA’s share of distressed mortgages in Cleveland was higher than the national average and rising. Home prices in the Cleveland area did not rapidly appreciate during the housing bubble; however, local home prices following the bubble fell by nearly as great a percentage as those for the rest of the nation. By the start of the national mortgage crisis in 2007, Cleveland had already experienced several years of above-average unemployment, net job losses, and population declines. Researchers found that as the national housing crisis began, high-cost or subprime loans in Cleveland were defaulting at eight times the rate of other local mortgages.

The Atlanta MSA is geographically large; it includes five core counties (Clayton, Cobb, DeKalb, Fulton, and Gwinnett) and 23 other counties in northwest Georgia. Although the share of distressed mortgages in and around Atlanta — those 90 or more days delinquent, in foreclosure, or bank owned — has been above the national average since mid-2000, the local foreclosure crisis has generally mirrored that of the nation as a whole, with a significant rise in delinquencies and defaults among subprime loan borrowers beginning in 2007. Declining property values and underwater mortgages in Atlanta’s current market were fueled by rising defaults and excess housing construction. The economic recession hit Atlanta particularly hard; the region lost a total of 194,000 jobs between 2008 and 2010, and the area continued to shed jobs through the third quarter of 2011.

The most recent spotlight features the Tampa MSA, which includes four counties in west-central Florida, another of the severely impacted sand states. Tampa’s housing market has experienced more severe problems than have most areas of the nation. Florida has the third-longest average foreclosure processing time in the country, as lender processing delays and a backlog in the courts leave many mortgages lingering in the foreclosure pipeline. During the early part of the past decade, investor speculation helped local home prices rise at nearly double the pace of the national average. This speculation, along with excess housing construction in the years before the crisis, caused home prices in the Tampa MSA to fall more steeply than in most parts of the country.

The above and forthcoming housing scorecard regional spotlight reports can be found here.

1. June 2010 letter from Kathryn Wertheim Hexter, Cleveland State University, and Claudia J. Coulton, Case Western Reserve University, appearing as a foreword in Federal Reserve Bank of Cleveland. 2010. Facing the Foreclosure Crisis in Greater Cleveland: What Happened and How Communities Are Responding, available at blog.case.edu/msass/2010/06/30/Facing_the_Foreclosure_Crisis_June_2010.pdf. Accessed 19 February 2012.