The Foreclosure Crisis at Five Years Old

Housing prices increased in almost 90% of US cities in Q2 2013

The national foreclosure rate has fallen by 52% since its peak in 2010

4.5 million foreclosures have been completed since 2008

Some Progress

1 million homes (2.3 % of all mortgages) are still in foreclosure, and 2.3 million (5.6%) are seriously delinquent

2.2 trillion loss in property values for homeowners near foreclosed properties

Challenges Remain:

24% of homeowners are under-equitied or underwater; over half are underwater by 20% or more.

Challenges Remain:

Regional Patterns

Significant state-wide variation in the pace of recovery

Pace of recovery influenced by presence of investors, low interest rates

Over 50% of home sales in 2012 and 2013 have been cash-only

In some cases, private investors crowd out individual homeowners and nonprofit developers

An Investor-Driven Recovery?

http://www.realtytrac.com/content/news-and-opinion/individual-investors-feeling-squeezed-out-by-bulk-buyers-7673

NSP funds are running out: need for new sources of capital for community revitalization

Opportunities for public-private partnerships to address ongoing issues in distressed neighborhoods

Local market characteristics and policies drive investor behavior

Challenges for Communities and Governments

Different markets lead to different investor behavior

Investors and Incentives: Las Vegas vs. Detroit

Predominant Investor Type

Market Characteristics

Investor Behavior

Las Vegas

Short-term holders (3-5 years)

House prices on the rise, significant inventory, low property taxes; strong support system of realtors, property managers, etc.

Investors rent until property appreciates in value, then sell; growing role of overseas investors

Detroit

‘Milkers’ (no expectation of appreciation or sale)

Property taxes from 25-50% of market value, slow growth in property values post-Recession

Investors collect rent on properties without paying property taxes, walk away when properties go into tax foreclosure

Rebuilding Communities – Ongoing Challenges

• Recession-driven wealth losses undid decades worth of investment in black and Hispanic households

• Tighter post-recession credit standards disproportionately impact lower-income and minority communities

• Dodd-Frank regulations may impact delivery of credit to underserved communities