the visible hand

it is the theory which decides what can be observed – einstein

Intrametropolitan Patterns of Foreclosed Homes

Posted by ecoshift on May 5, 2009

Intrametropolitan Patterns of Foreclosed Homes: ZIP-Code-Level Distributions of Real-Estate-Owned (REO) Properties during the U.S. Mortgage Crisis
Federal Reserve Bank of Atlanta: Community Affairs Discussion Paper Series

During the mortgage crisis, community developers, policymakers, and others have become increasingly concerned about the extent to which lender-owned homes, often called real-estate-owned or “REO” properties, have accumulated in their neighborhoods and communities. REO properties are usually vacant and, especially when geographically concentrated, can have destabilizing impacts on neighborhoods and communities. However, due to data challenges, little systematic research has been done on the intrametropolitan distributions of such properties, especially across different metropolitan regions as of November 2008. First, the urban-versus-suburban distribution of REO is found to vary significantly across metropolitan areas. In general, in traditionally weak-market metros—many of which had substantial REO levels before the advent of the national mortgage crisis—REO tend to be relatively concentrated in central cities. Conversely, in regions where REO accumulated more recently and in those with high central-city housing prices, REO tend to be somewhat more suburbanized. Second, while ZIP codes with high REO densities are disproportionately located in central cities, this pattern varies significantly across metropolitan areas. In particular, in the formerly “hot-market” regions where home values have declined rapidly, a large majority of ZIP codes with “severe” REO levels are suburban. Finally, among suburban ZIP codes, those with long commute times experienced larger increases in REO over the November 2006 to 2008 period than those with shorter commute times. The paper concludes with some broad implications for community development policy and planning.

Intrametropolitan Patterns of Foreclosed Homes is available online [as a pdf] at:

About the Author: Dan Immergluck is a visiting scholar in community affairs at the Federal Reserve Bank of Atlanta and an associate professor of City and Regional Planning at the Georgia Institute of Technology.


One Response to “Intrametropolitan Patterns of Foreclosed Homes”

  1. Dave said

    Several states dramatically overbuilt due to housing demand that was stimulated by less than prime borrowers that were able to get credit. Overbuilding was a problem particularly California, Florida and Nevada. Land at low prices tends to be available outside the center of a thriving metro area. This probably explains the distant suburb REO effect.

    In “weak market metros” , metro housing inventory was already high enough for easy credit to support home purchases within the metro area. Weak metros were also low income areas with more residents available as targets for sub-prime mortgage brokers.

    Finally, more REO’s are in California since, by law, all California purchase money mortgages are non-recourse mortgages. This encourages Californians to walk away from underwater mortgages and still keep the BMW, the stock portfolio and the bank account. With changes in income taxes recently, there is not even an IRS penalty for stiffing the bank.

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