Foreclosure Crisis: Is It Overblown?

A recent list of year-end mortgage foreclosure rates in 100 top metropolitan areas is drawing a lot of attention.  The list showed the number of foreclosure filings in each metro area, the percentage of homes being foreclosed and the percentage change from the previous year.

The news will disappoint the gloom-and-doom crew and all those seeking the excitement of financial upheaval.  But it may be time to temper our worry and take a closer look at some of the year-over-year foreclosure statistics:

Though the national rate of foreclosure increased by a whopping 79% between December 2006 and December 2007, the rate was still only 1.033%.  Because about 30% of all homes are owned mortgage-free, this means that for all the noise about a crisis, only seven-tenths of 1% of all homes were in foreclosure.

In the top 100 housing markets, the average foreclosure rate was somewhat higher — 1.38% — and it was up 78% over the previous year.  But if you rank-ordered the list of the top 100 areas, only 34 had foreclosure rates above the group average.  Fifty-one areas had rates of 1% or less.

Foreclosure rates actually fell in 14 of the 100 areas.  More importantly, many of the areas with the highest increases in foreclosure rates were rising off rates that were tiny.  In other words, foreclosures there were virtually nonexistent the year before.  Today they are still well below the national average.

Another pattern emerges if you cross the foreclosure rates with the Office of Federal Housing Enterprise Oversight (OFHEO) index of home prices.  It shows that the top 10 foreclosure areas in America are areas of extreme price change — changes far from the national average of 46.92% over the past five years.

Talk back to us: Do you think the foreclosure crisis is overblown?  Leave us your comments or thoughts on this touchy subject by clicking the "comment" link below.  As always is our policy here, your email address will NEVER be published, so don’t worry about anyone spamming you because you leave a comment here.  We’d LOVE to hear from you!