The Columbus Dispatch reported Thursday that Ohio foreclosures have declined for three consecutive months while they continue to rise nationally. The experts are not sure whether this is a real turn in the trend or just a temporary break in a downward trend. While foreclosures are likely to continue to be a serious problem for Ohio communities and neighborhoods, there are reasons to think that the situation in other states will be worse.
The foreclosure crisis in Ohio has been driven by different factors than is true elsewhere. Nationwide there was a large run-up in house prices followed by a crash. Between the first quarter of 2002 and the second quarter of 2007 (when the market peaked), national house prices rose 47 percent, compared to 14 percent in Ohio and 15.5 percent in the Columbus MSA, according to the federal government’s FHFA House Price Index. Since then, national prices have fallen 3.8 percent, while Ohio prices are off 0.1 percent and those in the Columbus MSA have recovered and are up 0.7 percent. (Only 10 of the 50 largest metros have done better.) California, Florida, Arizona and Nevada account for 56 percent of foreclosure filings. The 2002-2007 house price gain in these four states was more than 90 percent, and their subsequent loss has been between 18 and 27 percent. Many of those buying in these states near the top of the market now owe far more than the house is worth. If the payment on the mortgage increases to an unaffordable level, they cannot refinance and have no alternative but to default.
Homeowners in these four states share the chief problem facing Ohio’s homeowners: payment problems due to job loss. Ohio employment has declined 5.9 percent since the beginning of the recession – equal to California’s loss, but less than the 7.2 percent in Florida, the 7.8 percent in Nevada, and the 9 percent in Arizona. The rate of job declines is expected to decrease in coming months, but the recovery in the housing market in boom states is likely to be much longer in coming.
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