D.C. Region's Foreclosure Rate Soars
Thursday, June 19, 2008
The Washington region now has one of the fastest-growing foreclosure rates in the nation, as 15,613 homes went into foreclosure during the one-year period ending in February, an analysis to be released today has found.
Although communities have felt the effects of the housing crisis for months, the report reveals that foreclosures in the Washington region have been increasing at a surprisingly quick pace, outstripping those of most major metropolitan areas. Over the past year, the number of foreclosures per 10,000 homes jumped from 23 to 131 locally, while the national average increased from 58 to 87.
The nation's hardest-hit areas of Phoenix, Miami and San Francisco have a greater share of homes in foreclosure, but the sixfold increase in the Washington area tops that of any other region in the report, commissioned by the Metropolitan Washington Council of Governments and Freddie Mac.
"While foreclosures were practically nonexistent in the Washington area 18 months ago, it's now very prevalent, and we're above the national average," said the report's author, John McClain, deputy director of George Mason University's Center for Regional Analysis.
Although Prince William and Prince George's counties have experienced the most home foreclosures, the report identifies several communities as potential "hot spots" for future foreclosures, including Centreville, Falls Church, Herndon and Vienna in Fairfax County, Germantown and Olney in Montgomery County and Adams Morgan in the District.
The Council of Governments is establishing an emergency fund with private contributions to support nonprofit groups that provide mortgage counseling and money for shelter, food and utilities for affected families.
"We're all trying to figure out where is the bottom, and I think the story shows that we're probably not there yet," said Montgomery County Council President Michael Knapp (D-Upcounty), who also chairs the Council of Governments. "We're going to need to work within our individual jurisdictions and collectively come up with some strategies to deal with it. We can't ignore it."
The region's crisis ballooned in part, McClain said, because a large stock of new homes was sold to many first-time home buyers, some of them immigrants, under loans with adjustable rates. When their monthly payments increased, many home buyers were unable to keep up, which led to foreclosures.
"Where you've had more immigrants, they are after the American dream, and as soon as they can buy a house, that's what they're doing," McClain said. "In many cases, they're overreaching."
His research suggests that foreclosures will increase until at least early next year, largely because of decreasing home values. "When the price of housing drops to an extent that the amount you owe is more than the house is worth, if you don't have a lot of equity, there is a tendency to walk away from it and just have it foreclosed," McClain said.
The analysis found that the steepest declines in home sale prices, between April 2007 and April 2008, occurred in the outer suburban ring, defined as Loudoun, Prince William and Frederick counties. The average price there dropped by $110,900, or 25 percent. The inner ring, Fairfax, Montgomery and Prince George's, had a decline of 3.2 percent. The core, defined as the District, Arlington County and Alexandria, experienced an increase of 3.4 percent.
The study did not include Southern Maryland or Howard and Anne Arundel counties, which are not members of the regional council.