housing
Behind the foreclosure surge in New York, New Jersey
April 15, 2013: 6:00 AM ETHow did New York and New Jersey jump to the top of the foreclosure list, behind only Florida? Red tape.
FORTUNE – Just as most of us believe we've seen the worst of the housing market's collapse, two unlikely states are only now getting hit with a wave of foreclosures: New York and New Jersey.
The region was largely spared when home prices disastrously tumbled in 2007. New York and New Jersey, with some of the nation's priciest homes and highest property tax rates, saw nowhere near as many foreclosures during the Great Recession as most of the rest of the country. But that has changed.
Next to Florida, New York and New Jersey have the highest share of homes undergoing foreclosure relative to all homes with mortgages, according to a report by CoreLogic. In February, Florida had the highest share at 9.9%, followed by New Jersey at 7.2%, and New York at 5%.
MORE: Investor frenzy over housing has peaked
This might come as a surprise, given that household finances in the two states have generally fared better than the rest of the country in recent years. But while there are fewer mortgages in New York and New Jersey entering foreclosure every month than nationally, more of them have been getting stuck in the process. That's because the two states use a judicial foreclosure process, which generally requires that foreclosures go through a state court.
Between 2010 and 2012, the share of mortgages entering foreclosure each month was 0.24% in upstate New York, 0.36% in downstate New York and 0.40% in northern New Jersey -- all lower than the national average of 0.42%, according to a recent report by the Federal Reserve of New York. This is a good thing, but since foreclosures take longer to process, it also slows down the region's housing recovery. On average, it takes 503 days to complete a foreclosure in New York and 481 days in New Jersey, markedly higher than 318 days nationwide, according to the Fed.
This says less about the strength of the recovery than the unintended consequences of New York and New Jersey's foreclosure laws. While the regulations certainly protect homeowners, they also hamper the housing market's healing process.
MORE: Even housing bears bought big homes before the crash
The longer a home is in foreclosure, the greater the potential for it to deteriorate and for its price to decline, the Fed notes. There's little, if any, incentive for homeowners to maintain or improve their homes once they start the foreclosure process. As a result, the homes tend to deteriorate more rapidly than otherwise similar homes.
Home prices in New York and New Jersey have stabilized, but the Fed expects foreclosures to continue dragging down prices in the coming months. True, the housing markets in these two states are already pricier than most of the rest of the country. And keeping them lower would make homes more affordable, which isn't so bad for buyers. It does, however, mean the residual effects of the Great Recession may linger longer.
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Investor frenzy over housing has peaked
Signs that the big money has retreated from the foreclosure boom may be good for the housing market overall.
FORTUNE – When the U.S. housing market crashed in 2007, millions lost their homes to foreclosure. With their finances in shambles, they picked up the pieces by renting rather than buying. Big institutional investors quickly caught on, snapping up foreclosed properties on the cheap and renting them out.
All this has helped drive MORE
Nin-Hai Tseng, Writer - Apr 5, 2013 5:00 AM ET -
Freddie Mac and Fannie Mae: Too little, too late for struggling borrowers?
Lending giants Freddie Mac and Fannie Mae are swooping to the rescue just as the housing market turns the corner.
FORTUNE -- Freddie Mac and Fannie Mae announced this week they were making it easier for struggling borrowers to lower their monthly payments. No longer will borrowers who are at least 90 days delinquent have to prove hardship, as the mortgage giants will waive previous requirements that called for documents detailing their MORE
Nin-Hai Tseng, Writer - Mar 29, 2013 10:51 AM ET -
3 reasons why the jobs report is really good
The housing recovery and an increase in hours worked are among the factors lifting jobs numbers, but it's unclear if this growth can continue.
FORTUNE – After reaching record highs, U.S. markets have a few more reasons to celebrate Friday as the government released its monthly report on the state of the jobs market. In February, the economy added 236,000 jobs, which helped lower the unemployment rate to 7.7% from 7.8% MORE
Nin-Hai Tseng, Writer - Mar 8, 2013 12:02 PM ET -
A sign the housing recovery just might stick
Mortgage applications were higher again in January. If individual buyers dominate home sales as opposed to investors, we might see a more sustainable housing recovery.
FORTUNE -- Investors armed with cash have largely driven the recovery of the U.S. housing market to date, but a few signs suggest that trend may be easing up. For the past five months, applications for new mortgages have risen, suggesting that regular buyers may be MORE
Nin-Hai Tseng, Writer - Feb 8, 2013 10:34 AM ET -
Housing is indeed heading higher
As Fortune predicted last year, a robust recovery in home prices is under way.
FORTUNE -- In spring 2011 this writer penned a controversial cover story titled "The Return of Real Estate" that predicted a strong rebound in housing. At the time, prices and sales were still tumbling, and the prevailing view among economists and pundits was that the slide would drag on and on. But Fortune's contrarian forecast proved right. MORE
Shawn Tully, senior editor-at-large - Oct 18, 2012 5:00 AM ET -
Buying into a housing comeback
Stocks of homebuilding companies have taken off - but they still have room to run.
FORTUNE -- It has happened repeatedly: The housing market shows hints of revving up only to sputter and stall. In fact, by Deutsche Bank's count, there have been seven false recoveries during the six-year national housing downturn. Now there are signs that a true residential property recovery is under way. Exhibit A: Stocks of homebuilding companies MORE
Scott Cendrowski, writer-reporter - Jul 16, 2012 5:00 AM ET -
Welcome to the mortgage-free housing recovery
A modest housing recovery is under way, even as bank lending remains tight. But cash buyers won't be enough to turn it into a robust recovery.
FORTUNE – It almost goes without saying that plenty of headwinds weigh on America's troubled housing market. To name a few: A weak job market, Europe's ongoing debt crisis and a persistent excess supply of homes for sale.
But now we can scratch one obstacle off MORE
Nin-Hai Tseng, Writer - May 23, 2012 12:30 PM ET -
3 ways to write down mortgages without moral hazard
A plan to offer principal mortgage reductions to struggling homeowners could backfire by encouraging many to stop making their payments. Here are some ways around that.
FORTUNE – Pressures have been mounting to give struggling homeowners financial relief by reducing the principal on their home loans – a key ingredient, many economists agree, to solving America's housing woes.
Over the next few weeks, acting Federal Housing Finance Agency director Edward DeMarco will MORE
Nin-Hai Tseng, Writer - Mar 28, 2012 11:57 AM ET -
Bank of America faces hurdles in rentals
Bank of America's foreclosure alternative isn't new -- Fannie Mae has been doing it for years with lackluster interest from borrowers.
FORTUNE – To help struggling homeowners, Bank of America recently launched a test initiative that will give some a chance to rent the very homes they risk losing. Last week, the Charlotte, NC-based bank began sending letters accompanied with leases to 1,000 homeowners in Arizona, Nevada and New York.
The move MORE
Nin-Hai Tseng, Writer - Mar 26, 2012 10:23 AM ET
