Despite the substantial improvements in the housing market recently, foreclosures and underwater mortgages continue to weigh down the economy. One of the most acute problems is that foreclosures don’t only harm the family that loses a home, but also drag down property values for entire neighborhoods, sinking more households underwater (meaning the house is worth less than the amount outstanding on its mortgage).
According to a new report from the Center for Responsible Lending, homeowners will lose nearly $2 trillion in property value due to living near foreclosed properties:
— $1.95 trillion in property value has been lost or will be lost by residents who live in close proximity to foreclosures. These losses include both the spillover impact of homes that have completed the foreclosure process and future losses that will result from homes that have started but not yet completed the foreclosure process.
— Over one-half of the spillover loss is associated with communities of color. Minority neighborhoods have lost or will lose $1 trillion in home equity as a result of spillover from homes that have started the foreclosure process, reflecting the high concentrations of foreclosures in neighborhoods of color.
— On average, families affected by nearby foreclosures have already lost or will lose $21,077 in household wealth, representing 7.2 percent of their home value, by virtue of being in close proximity to foreclosures. Families impacted in minority neighborhoods have lost or will lose, on average, $37,084 or 13.1 percent of their home value.
The Obama administration has implemented several foreclosure prevention programs, but they’ve fallen short of their goals, with just a fraction of the money earmarked for them having been spent. At least the administration has finally come around to recess appointing a replacement for Acting Federal Housing Finance Agency Director Edward DeMarco, who has blocked crucial aid for homeowners.