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Foreclosure-related filings topped 300,000 last month, according to foreclosure-tracking firm RealtyTrac.

Nationwide, 1 in every 418 households was served some form of foreclosure notice but -- as always -- foreclosures are more common in some areas than others.

Many Foreclosures, Few States

In February 2010, 4 states accounted for more than half of the country's foreclosure-related activity:

• California : 22.2 percent
• Florida : 17.5 percent
• Michigan : 6.5 percent
• Illinois : 5.6 percent

Combined, these four states represent 56% of foreclosures but just 25% of the population. Clearly, foreclosures are a local phenomenon.

They're also the spring season's biggest story.

Foreclosures Are A Growing Percentage Of Total Sales

Because foreclosures and other "distressed" homes tend to sell at a discount, they now account for 38 of all home resales.  This is up from 33 percent in the month prior.

For first-time homebuyers, move-up homebuyers, and even for investors with more than 4 properties, buying foreclosures in Cincinnati and Chicago has never been easier.

Foreclosures are big business and new listings are available 24/7.

Where To Find Foreclosures Online For Free

My clients have told me that there 3 websites, in particular, are a good place to start for foreclosures, if that's what interests you. Each site offers a free, 7-day pass and that's usually enough to help you scout the market for something worth buying.

1. RealtyTrac offers free access to foreclosure listings
2. Foreclosure.com offers free access to foreclosure listings
3. HUDForeclosed.com offers free access to foreclosure listings

Then, when you see something you like, talk to your real estate agent about it, or to a skilled foreclosure-specializing agent. Negotiating for a bank-owned home is different from negotiating for a "regular" home.

You're going to want somebody experienced on your side.

How To Get Pre-Approved For A Foreclosure

High foreclosure levels have led to interesting buying opportunities. Do your search and see what comes up for you locally. Then, when you're ready for your pre-approval letter, call me and I'll take care of you.  I'm experienced with short sales and REOs and would be happy arrange for your mortgage.

My rates are very good and my bank can close loans quickly.

Foreclosure-related filings topped 300,000 last month, bringing the 12-month total to somewhere near 1.4 million nationwide.  Some states, of course, are more foreclosure-heavy than others.

According to RealtyTrac, the state of Nevada keeps its title as Foreclosure Central with a foreclosure rate 4 times the national average.  Arizona, California and Florida aren't far behind.

In fact, the country's foreclosure activity is so heavily concentrated that a full 40 states fall below the national foreclosure average.  That's a fascinating statistic and puts some perspective on the "foreclosure crisis" we keep hearing about. Clearly, foreclosures are a local phenomenon.

Oh, and they're selling like hotcakes, too. Distressed homes now account for 1/3 of all home resales.

The good news is that buying a foreclosure in Cincinnati, Chicago, or anywhere else has never been simpler.  Because foreclosures are big business now, a cottage industry has spawned and reliable foreclosure data is available 24/7.

These 3 websites are a good place to start.  Each offers a free, 7-day pass and that's usually enough to help you scout the market.

1. RealtyTrac offers free access to foreclosure listings
2. Foreclosure.com offers free access to foreclosure listings
3. HUDForeclosed.com offers free access to foreclosure listings

Then, when you see something you like, talk to your real estate agent about it. Negotiating for a bank-owned home is different from negotiating for a "regular" home. You're going to want somebody experienced on your side.

High foreclosure levels have led to interesting buying opportunities. Do your search and see what comes up for you locally. Then, when you're ready for your pre-approval letter, call or .

I'm experienced with short sales and REOs and will arrange for your mortgage.

My rates are very good and my bank can close loans quickly.

At the risk of appearing obsessed with foreclosure data, I want to run another chart of the country's Top 10 Foreclosure States.  Thank you to my friends at RealtyTrac for running this report special for me.

Foreclosures have always been an issue for banks, but since 2005, the percentage of foreclosure filings coming from the top 10 foreclosure-filing states has moved markedly higher.

• Q1 2005 : 64.3 percent
• Q4 2009 : 72.4 percent

The U.S. foreclosure problem is concentrating by geography.

And meanwhile, the 10 states included in the list -- California, Florida, Illinois, Arizona, Michigan, Texas, Georgia, Nevada, Ohio and Nevada -- account for just 45% of the nation's population.

Distilled, 45 percent of states represent 72 percent of foreclosure filings.

Clearly, some states are more foreclosure-heavy than others. We must use cautioun when interpreting national housing statistics. A few states can distort the bigger picture.

For example, when RealtyTrac says annual foreclosures reached 2.8 million last year and that foreclosures are up by one-fifth, that's a national story.  On a local level, however, the story's much different.

10 states showed year-over-year improvement in 2009 -- including Ohio and Indiana. Both states had been hard-hit by losses in manufacturing.

And even when we examine states like Florida and Arizona -- two of the most foreclosure-heavy states in the nation -- we can find areas in which foreclosure filings are down and the housing market is thriving.

Miami is a terrific example of this.

All real estate is local.  Period.  We can't compare states any more than we can compare Dayton to Cincinnati.  Heck, we can't even put Montgomery and Blue Ash in the same conversation. Even though both towns feed into Sycamore schools, each has unique characteristics that drive its home values.

Big picture data is important, but it's what happens on the streets that matters, pardon the pun.

Buying foreclosures is big business so if you're searching foreclosed homes in Cincinnati, start with this link to RealtyTrac.  There's a 7-day free pass to the database and that should be enough time to help you gauge the market and identify some homes. The local market won't be as big as the national news stories would have you believe, but it's still there.

Then, when you've found a home and need a prequalification letter to accompany your offer, and I'll get you handled.

Working with foreclosures -- especially jumbo ones -- is among my strong suits.

Let's hear it for Ohio.

As reported by RealtyTrac.com, the Buckeye State is the only state among the Top 10 in 2009 Foreclosure Activity to post fewer filings versus 2008.

It's a nice boost for a state that's been beaten down by high unemployment and the New York Jets. Foreclosures are slowing statewide, helping both home values and homeowner morale. The market is turning.

The RealtyTrac 2009 Foreclosure Report included some other noteworthy nuggets, too.

1. 46 states account for just 49% of 2009's foreclosures. California, Florida, Arizona and Illinois account for the rest.
2. The nation averaged 1 foreclosure filing per 46 households. 80% of states fell below the national average.
3. The pace of foreclosure filings fell in 10 states (including Ohio).

For as thorough as the RealtyTrac report is, though, it's easily skewed by factors from the outside, the biggest of which is political. Many states have enacted some form of foreclosure prevention law that slows, delays, or halts the foreclosure process. Another factor is a lender's ability to process large numbers of foreclosures at one time.

There could be many more in-trouble homeowners than the data has us believe.

It's not stopping foreclosures from being big business, however. Distressed homes account for one-third of home resale activity, according to the National Association of REALTORS™. The key to getting a "deal" is to find the cheap home before the next guy.

The good news is that you don't need a real estate agent to get started on your search.  A host of websites aggregate and collate foreclosure information, presenting it like a listing sheet.  You can search for homes using an innumerable number of traits.

3 sites that provide great information include:

1. RealtyTrac (free 7-day access)
2. Foreclosure.com (free 7-day access)
3. HUDForeclosed.com (free 7-day access)

If you're considering foreclosed homes as a first-time or move-up, or even as an experienced investor, register with all 3 sites -- each pulls from a slightly different data set so you'll see different homes from one site to the next.  You'll be able to quickly narrow your search to the viable homes and get on with the business of buying.

Even in Ohio, foreclosure opportunities are still out there. Search online and see what you find. Then, when you're ready for your pre-approval letter, call or . I'm experienced with foreclosures for first-time buyers and can also do mortgages for people that own more than 4 properties.

Oh, and my rates are really good.

Foreclosure activity in most the nation's largest states dropped last month, buoying the national average lower despite 30 states faring worse than the national average.  Total foreclosure activity nationwide slipped for the 4th straight month.

Versus October, activity is down 8 percent.

A reduction in foreclosure activity is big news for housing, but the big-ger news is buried in the stats.

1. Defaults in Nevada -- the foreclosure front-line leader -- are down 33% from 2008
2. Foreclosures Per Capita are lower for the majority of states
3. Job-ravaged Ohio's foreclosures are down 9 percent from last November

Overall, November's foreclosure report is another positive signal for the housing market.  Recovery is underway.

But for homebuyers searching foreclosed properties, the window for "a deal" may be closing.  The supply of distressed property is dropping and multiple-offer situations are increasingly common.  The key, therefore, is to find a property before the next buyer and, let's face it, your real estate agent has other clients besides you.

Some homework you're better off doing yourself.  The good news is that you don't have to go far to do it.

Since foreclosures, short sales and REO have become Big Business, tens of tech firms have tried to capitalize on the need for a better system of distressed-home aggregation. So far, 3 companies have emerged as winners, each offering 24/7 access to foreclosed homes in every zip code in America with tons of searchable traits.

1. RealtyTrac (free 7-day access)
2. Foreclosure.com (free 7-day access)
3. HUDForeclosed.com (free 7-day access)

If you're considering foreclosed homes as a first-time buyer, a move-up, or even as an experienced investor, consider registering with all 3 -- each pull from a slightly different database so you may see different homes from one site to the next. It should give you a good list of homes to starting seeing with your agent when you're ready.

Foreclosures activity is slowing, but -- for now, at least -- buying opportunities are still out there. Search online and see what you find. Then, when you're ready for your pre-approval letter, call or . I'm experienced with bank-owned homes and am as comfortable with first-time buyers as with investors owning more than 4 properties.

Plus, my rates are really good.

The pace of foreclosure activity slowed for the third straight month last month.  According to RealtyTrac.com, foreclosures are down 3 percent from September.

Slowing foreclosure activity is big news for the housing market, but the big-ger news is buried in the stats.

1. Foreclosure activity fell in 9 of the top 10 foreclosure states nationwide
2. Defaults in Nevada -- long the Foreclosure Capital of the County -- plunged 10% from last October
3. Job-ravaged Ohio's foreclosures are down 4 percent from last October

Overall, this month's foreclosure report is another positive signal in the housing market.  Recovery is underway.

For homebuyers looking at foreclosed homes, though, the window for "a deal" may be closing.  Since foreclosures became "big business" toward the end of 2008, real estate firms found ways to make buying a foreclosed home faster and cheaper.

It's no surprise that distressed properties now account for nearly 1/3 of home resales.

Especially because foreclosure data is now free 24/7.

If you're considering a foreclosed home, check out these 3 websites.  They're among the biggest of the foreclosure-tracking companies and each offers a free, 7-day pass.  That's usually enough to get you on the right path so you know what to tell your real estate agent.

1. RealtyTrac (free 7-day access)
2. Foreclosure.com (free 7-day access)
3. HUDForeclosed.com (free 7-day access)

You may want to register with all 3 because each site uses slightly different foreclosure sources.

The number of foreclosures are slowing, but, for now, the buying opportunities are still out there. Search online and see what you find. Then, when you're ready for your pre-approval letter, call or . I'm experienced with bank-owned homes and I'm as comfortable with first-time buyers as I am with investors owning more than 4 properties.

Plus, my rates are really good.

The severity of the "Foreclosure Crisis" depends on where you live, it seems. According to the RealtyTrac.com Q3 foreclosure report, Foreclosures Per Household skews heavy towards just a few states.

Nevada leads the nation with 1 foreclosure per 23 households. Its rate is six times the national average of 1 foreclosure per 136 households.

Arizona, California, and Florida are a distant 2, 3 and 4, respectively.

Foreclosures can be difficult for families that lose their homes, but for real estate investors and other homebuyers, distressed properties can represent a tremendous homebuying opportunity.

Especially now that "buying foreclosures" is big business.

Since 2006, as the number of foreclosures have risen, so have the number of companies offering access to national foreclosure databases.  And all of them provide unlimited, free access to their foreclosures listings for 7 days.

3 of the most popular foreclosure-listing companies include:

1. RealtyTrac (free 7-day access)
2. Foreclosure.com (free 7-day access)
3. HUDForeclosed.com (free 7-day access)

Each foreclosure database is unique so it may not be a bad idea to register with all 3.

Foreclosures are creating buying opportunities. Search online and see what comes up. Then, when you're ready for your pre-approval letter, call or . I'm experienced with bank-owned homes and I'm as comfortable with first-time buyers as with investors owning more than 4 properties.

Plus, my rates are really good.

According to the August RealtyTrac.com foreclosure report, the severity of the "Foreclosure Crisis" depends on where you live.  Foreclosures Per Household are highly skewed towards just a few states.  The data is so lop-sided, in fact, that 41 states fall below the national average.

For shoppers of foreclosed homes, the RealtyTrac data is a true buyer's guide to Where To Find Distressed Homes.

With 1 foreclosure for every 62 households, Nevada is Foreclosure Central. Its default rate is six times the national average of 1 foreclosure per 357 households. Florida, California and Arizona are a distant 2, 3 and 4.

The phrase "Foreclosed homes" used to be a scary one. Agents were unfamiliar with distressed homes and banks weren't skilled in selling them.

Since 2007, though, gradually, both sides have grown more comfortable with foreclosures and it's now at the point where buying a distressed property is cheaper, faster, and easier than ever before.

The auction block is no longer reserved for experienced real estate investors. Today, anyone can buy a foreclosed home -- and does.  Especially first-time home buyers out looking for a bargain.

Home buyers and other "casual lookers" can use RealtyTrac's completely free 7-day trial to see foreclosed homes for sale in every zip code countrywide.  All you give is an email address and, in exchange, you get access to the full-featured search engine.  After 7 days, you can decide whether the full membership is worth paying for.

Foreclosure.com has an excellent site, too -- also with a 7-Day free trial.  It draws from a different database so signing up with both companies isn't such a bad idea, either.

Large numbers of foreclosures have created interesting buying opportunities nationwide. do your search and see what comes up.  Then, when you're ready for your pre-approval letter, call or . I'm experienced with short sales and REOs and can arrange your financing for you.

According to RealtyTrac, for the manyth consecutive month, foreclosures are concentrating across just a few states.  The data is skewed so badly that 44 states fall below the national average.  That's saying something.

With 1 foreclosure for every 56 households, Nevada by far leads the country.  It's default rate is six times the national average of 1 foreclosure per 355 households.  California, Arizona and Florida are a distant 2, 3 and 4.

The number of foreclosures are up 7 percent nationally.

For real estate investors and other home buyers, RealtyTrac's data can be a roadmap of sorts to finding "good deals".  Not every foreclosed home will be a gem, but there are plenty of low-priced properties just begging for a qualified buyer.

RealtyTrac lists them by ZIP code.

"Foreclosed homes" used to be a frightening phrase in real estate.  Agents were unfamiliar with them and banks didn't always know how to dispose of them.  Over the past 18 months, however, as both sides have grown more comfortable with foreclosures, the process of buying home in default has become both simpler and quicker.

This is no more apparent than in the number of first-time home buyers looking at foreclosed properties.  In the past, buying a home at auction or from a bank was the realm of the experienced real estate investor. Today, a real estate investor bidding on foreclosure may find himself competing with a first-timer, a family looking for vacation property, and households getting ready for retirement.

Buying a home in foreclosure is (almost) a non-event.

Several companies aggregate foreclosure listing including the aforementioned RealtyTrac.  It offers a completely free 7-day trial.  So does RealtyTrac competitor Foreclosure.com. Presumably, both draw from slightly different databases to register at both may make sense -- it's free for 7 days, after all.  After 7 days of free access, you should know whether a paid membership is ultimately worth it.

Foreclosures can be terrible for impacted households but to the tuned-in buyer, they can represent opportunity.

It's transcended trending -- it's now a given.  Foreclosures regionalize.

In June, for the brazillionth time in as many months, just 3 states accounted for half of the country's foreclosure-related activity.  The top 10 states accounted for 75%.

Clearly, the foreclosures crisis doesn't impact every state in the same way.

Setting aside the personal pain foreclosures can cause, the massive mortgage default numbers have a silver lining.  Both first-time home buyers and opportunistic real estate investors can now buy foreclosed homes at relatively low prices and finance them at attractive mortgage rates.

Not every foreclosure is going to a "diamond in the rough" but there are some great deals to be had out there.  It may help explain why distressed properties accounted for nearly half of all home resales in April and for one-third of May's.

Meanwhile, to meet the burgeoning demand for foreclosed homes, several real estate companies built high-powered Foreclosure Search Engines geared at general home-buying public.  Whether you're a home buyer, real estate investor, or just curious about your neighborhood, there's lot of ways to find a foreclosed home.

Foreclosure search engines are rarely free but often come with "trial periods".  Trial memberships are usually full-featured and you can use your 7 free days to make an unlimited number of queries to help ascertain whether or not the foreclosure market is a good fit for your personal real estate goals.

For example, if you're looking for foreclosed homes to convert into turn-key rental properties or a vacation home, you may want to use a trial membership to search the 3 states in which foreclosures are most prevalent.

• You can search for foreclosures in California with a click
• You can search for foreclosures in Arizona with a click
• You can search for foreclosures in Nevada with a click

Or, just search for foreclosures in general. This form, in particular, lets you search for foreclosures by ZIP code.

According to RealtyTrac, the number of Q2 foreclosures was the second highest on record so there's deals to be had if you know where to look.  And when you find that deal and want to finance it, be sure to reach out to me directly by phone or email.

I'd be happy to work with you.

If real estate is local, foreclosures must be, too.

According it May 2009 foreclosure trends report, foreclosure-tracker RealtyTrac showed that more than half of the country's foreclosure last month were concentrated across just 3 states:

1. California
2. Florida
3. Nevada

On a population basis, these 3 states represent 19 percent of the U.S. population.

The statistic can be startling, but no matter in which state you live, it's important to understanfd that foreclosures "somewhere else" have far-reaching influence.  This is because -- unlike you and I both -- a mortgage lender's personal geography isn't limited to just one city or one state.

In contrast, lenders "live" everywhere. 

As foreclosures degrade lender loan portfolios, consumers have to deal with things like higher downpayment requirements, tougher underwriting hurdles, and larger fee sets. 

Furthermore, similar to the fate of homeowners insurance rates after a hurricane, borrowers with less than 20 percent equity find that the cost of their private mortgage insurance increases dramatically, or becomes generally unavailable.

These changes impact to homeowners in all states -- not just the 3 named above.  And in some cases, they mean the difference between a home loan approval and an underwriting turndown.

That said, foreclosure-seekers are finding excellent affordability in real estate right now -- especially Snowbirds in search of warmer-climate homes for vacation or retirement.  It's one reason why May's Existing Home Sales report showed West Region sales up by nearly 20 percent -- there's plenty of good value there. 

Additionally, first-time home buyers in all markets are finding foreclosed-home price points to be sometimes irresistable.

If you're interesting in buying foreclosures -- either for personal or investment use -- the good news is that foreclosure-related information is generally available to the public.  Your real estate agent, for example, should be able to produce a complete list of available foreclosed home for you in whatever your target market is without much effort.

Or, if you're just kicking the proverbial foreclosure tires, consider using a free, online tool like RealtyTrac's "homes for half price" database.  It's a comprehensive, state-by-state listing of foreclosures with a 7-Day free trial attached to it.

The Pareto Principle is one of the more interesting theories of statistics and inequality.  Often called the 80/20 Rule, it states that 80 percent of the effects come from 20 percent of the causes. 

According to RealtyTrac.com's April 2009 data, the theory carries over in real estate, too. 11 states accounted for 80% of the country's foreclosure activity last month despite housing just half of the country's total population.

Despite being concentrated in just a few states, however, foreclosures remain a national problem.  This is because lenders aren't like homeowners; their geographies are rarely limited to just one city or one state.  By contrast, lenders "live" in all fifty states.  And with each foreclosure, their respective loan portfolios get weaker.

Over the long-term, foreclosures force lenders to trim mortgage guidelines, to add new borrowing fees, and to make fewer common-sense allowances.  If you've applied for a mortgage since early-2008, you've experienced this clamp-down first-hand. 

But the other side of the story is that for well-qualified buyers, a foreclosed home can sometimes be bought for a relative bargain and states like California, Florida, Nevada and Arizona are popular as vacation and retirement locations.

If buying foreclosures is part of your real estate plan -- for retirement or as a first-time buyer -- exploit the free 7-day trial at the RealtyTrac website.  Search by state, by county level, or even by zip code.  If for no other reason, you may find a bargain that your real estate agent missed.

Since 2007, foreclosures have dominated national real estate news.  You can't turn on the news or open a paper without seeing at least one foreclosure-related story.

But for all of the discussion, even two-and-a-half years after the peak of the housing market, home foreclosures continue to be geographically concentrated.

In looking at the latest stats from foreclosure marketplace RealtyTrac, more than half of the country's foreclosure actions from March 2009 occurred in just 3 states -- California, Florida and Nevada.

Those 3 states represent just 19 percent of the nation's population.

We can speculate about why these three states, in particular, dominate the foreclosure market.  Relative to other states, California, Florida and Nevada attracted an abnormal amount of real estate speculation and those homes were financed at a time when lender guidelines were at their loosest.

Values have since fallen and mortgage guidelines are more restrictive.  Homeowners, unable to sell or refinance, become more prone to default.  The same can be said for Arizona's numbers which, like the 3 states above, are disproportionately large.

The theory gains credence in looking at foreclosed homes in Illinois or Ohio. Both states have high numbers of foreclosures, but those foreclosures track more closely to the states' relative populations.  Likely, this is because neither state is considered a hotbed for real estate speculation.

Despite the country's somewhat local foreclosure distribution, foreclosure are a national issue.  This is because the banks that lend on homes lend in all 50 states -- not just 3 of them.  The impact of mortgage defaults in one region can quickly spread to others.

In part because of rising foreclosures nationwide, the following has happened:

• Mortgage guidelines have tightened for mortgage applicants
• Downpayment requirements have increased for home buyers
• Private mortgage insurance has become more expensive for everyone

Enter Zip:

This is an important set of changes for a would-be borrower or existing homeowner.  In some cases, the changes keep a person from qualifying for a home puchase or a refinance. Ironically, this can lead to more defaults which leads to tighter guidelines, and so on and so on.

You can search the March 2009 foreclosure report and foreclosure listings around the country on RealtyTrac's website.

(Post adapted with permission from Bring the Blog)

I like graphics. Graphics tell stories. Especially graphics like this one. 

According to RealtyTrac.com, California, Florida and Arizona -- home to just 19.99 percent of the country's populace -- accounted for half of the nation's foreclosure actions in February 2009.

This is especially interesting in the context of a USA Today graphic that gets granular on foreclosure down to the county level.  Turns out that when 2008 ended, 35 of the country's 3,232 counties were responsible for 50 percent of the year's foreclosure-related problems.

Foreclosure is a national issue, it's just not the kind of national issue that the press makes out to be. 

Sure, foreclosures exist and defaults do happen.  They're a more frequent occurrence than ever before.  But if you're living in Blue Ash, Ohio or La Grange, Illinois, you're not waking up to a street full of auction signs like some other folks.

But distance from the problem doesn't mean you're home free.  As loans go bad, mortgage lenders respond by tightening their guidelines; restricting what they'll lend and to whom.  It's one reason why downpayment requirements are higher and why loan-level pricing adjustments exist.

In this way, a local issue like mortgage default can be a problem to the nation as a whole.

RealtyTrac released its foreclosure data for August 2008, its headline reading in the usual Armageddon-like style:

FORECLOSURE ACTIVITY INCREASES
12 PERCENT IN AUGUST
Activity Up 27 Percent From August 2007

But, as is also typical, the news isn't nearly as dire as the headline would make us believe.

Looking at the data, it appears that U.S. foreclosure rates may have already crested because states like Ohio, Michigan and Florida showed marked improvement, as have some other states.

RealtyTrac even acknowledges as much on its corporate blog.

In addition, the report also contained two choice nuggets about where these foreclosures are happening.  According to the data:

1. Just 3 states accounted for more than half of the nation's foreclosure activity
2. The 80/20 Rule is still in effect

This tells us that the "national foreclosure crisis" isn't really national.  It's isolated to a few states and a few neighborhoods.  Nationwide, it's closer to business as usual and homeowners are doing just fine.

National trends are relevant, however, because when lenders take losses anywhere in their portfolio, they're apt to tighten mortgage guidelines everywhere.  This is a major reason why qualifying for a home loan is harder than it used to be, and why some lenders have onerous rules in states like Florida and California.

Tightening mortgage guidelines can be a preventative step.

Now, a few months doesn't make a trend, but the slowing rate of foreclosures may portend a gradual guideline loosening sometime in late-2009.  If lenders are less fearful of loss, after all, they would be more inclined to take on additional risk.

Ironically, this would help slow the foreclosure rate even faster because with looser mortgage guidelines, more homeowners could refinance their way out of trouble, or out of high interest rates.

RealtyTrac's May 2008 foreclosure report looks terrible in the papers, but there's good reasons why we don't get our news from the headlines only.

A deeper look at the data shows that the whole country is not being impacted equally. 

1. California is home to 8 of the 10 most foreclosure-heavy cities in the country
2. Just 4 states accounted for more than half of the country's foreclosure activity
3. Many states -- including Ohio -- showed a reduction in foreclosure activity

But of all of the interpretations, it's most astounding that the Pareto Principle is still (pretty much) in effect -- 80 percent of foreclosure activity was tied to just over 20 percent of the states.

Check out this chart from RealtyTrac's Q1 2008 Foreclosure Report.  It is misleading.

A common conclusion that people make from charts like this is that foreclosures are the cause of falling home prices.  That's false.  There may be a relationship between the two, but one doesn't necessarily cause the other.

Home prices fall when the supply of homes outweighs the demand for homes.

Yes, foreclosures can increase the amount of homes for sale in an area, but the demand-side of the equation is equally important as a predictor of home values.

Supply and Demand is the basis of all pricing.

Now, some parts of the housing demand equation are constant from season to season -- families outgrow their homes and move-up to larger ones; or desire a specific neighborhood in which to raise childen; or downsize into retirement. 

Other parts of home demand, however, are elastic.

For example, when the economy is sluggish, the number of real estate investors tends to diminish, as does the number of people asked to move for job-related reasons.  This slows the influx of buyers to a region, city, or neighborhood and places downward pressure on home prices.

And falling Consumer Confidence impacts demand for homes, too. 

When Americans are dubious about their economic future, they tend to play it safe(r).  Unsettled about financial prospects, homeowners will often choose stay in their current home versus buying a new one. 

Nationwide, consumer confidence levels are their lowest levels since the early 1990s.

And lastly, demand for home is subject to elements of psychology.  Some people simply don't like buying into a market they perceive to be falling.  Coincidentally Ironically, that becomes a self-fulfilling prophecy and the market spirals lower.

Because of the perceived Cause-Effect relationship between foreclosures and home prices, people like to cite a foreclosure "statistic" that's really just an observation.  The common belief is that for every foreclosure in a neighborhood, nearby home values lose 1 percent of their value. 

This is untrue because there's no evidence that values fell because of the additional home supply.  It's more likely related to the demand for homes.  In other words, there may be a relationship between the defaulted mortgage loan and falling values, but it's definitely not a direct one.

Home values fall for the same reason that foreclosure levels rise -- there's not enough buyer demand to cause otherwise.

RealtyTrac released foreclosure data for January 2008 and its report includes a nugget about real estate repossessions.  The full-size version is easier on the eyes.

Breaking out the data state-by-state, we can see that the Pareto Principle holds: 80 percent of the bank repossessions last month came from 20 percent of the states in the union.

As the largest sub-prime loan servicer in the country, Countrywide handles payments for 11.90% of the sub-prime market.  That's a massive $120 billion worth of loans.

According to Countrywide's servicing department, just 1.4 percent of its loans that defaulted in July 2007 defaulted because of "payment adjustment". Normally, data from one lender wouldn't be enough for a clean sample, but Countrywide is the largest servicer of loans and it holds that title by a longshot.

That's a tiny number.

The publicly available presentation also noted the other reasons why its homeowners defaulted on their mortgages:

• A decrease in household income led to 58.3 percent of all foreclosures
• Medical bills and/or illness led to 13.2 percent of all foreclosures
• Divorce led to 8.4 percent of all foreclosures
• Inability to sell a home led to 6.1 percent of all foreclosures
• Death caused 3.6 percent of all foreclosures

If we reverse the statistic, we find that 98.6 percent of Countrywide's sub-prime defaults in July 2007 happened for reasons other than an adjustable rate mortgage.

Flash forward to December 2007. 

The Bush Administration announced its plan to save qualifying sub-prime borrowers from foreclosures by "freezing" their mortgage interest rates.  If Countrywide's chart is even close to being accurate, the HOPE NOW program will amount to pouring perfume on a pig.

Instead of freezing sub-prime mortgage interest rates, it could be argued that a better way for HOPE NOW to slow the foreclosure rate among sub-prime borrowers would be to institute a national healthcare system specifically for sub-primers, or to outlaw sub-prime borrowers from divorce.

It's improbable (and tongue-in-cheek), but considering the self-reported reasons why sub-prime mortgage holders default on their mortgages, health and marriage are much more relevant. 

Source
Top Subprime Servicers
The Wall Street Journal Online
December 7, 2007

RealtyTrac published its Q3 2007 foreclosure statistics today and the data paints an interesting picture about the nature of home loan defaults.

Of the Top 10 MSAs in terms of Foreclosures Per Household, eight represent areas in which real estate speculation was rampant in 2002-2006, and two represent areas whose local economies have been decimated by job loss.

In other words, when it comes to mortgage defaults, sub-prime loans may be a symptom, but they're certainly not the cause.

If sub-prime mortgages caused foreclosure, we would expect that the state securitizing the most sub-prime loans in 2005 would be at least represented near the top of RealtyTrac's list of MSA Foreclosures Per Household. 

Instead, just one Rhode Island city ranked (#82).  Of the #3 sub-prime state (Mississippi), no cities were represented in the Top 100.

Instead, the Top 10 list includes cities like Stockton (which we've highlighted before) and Cleveland.

1. Stockton, CA (1 per 31 households)
2. Detroit, MI (1 per 33 households)
3. Riverside/San Bernardino, CA (1 per 43 households)
4. Fort Lauderdale, FL (1 per 48 households)
5. Las Vegas, NV (1 per 48 households)
6. Sacramento, CA (1 per 48 households)
7. Cleveland, OH (1 per 57 households)
8. Miami, FL (1 per 60 households)
9. Bakersfield, CA (1 per 64 households)
10. Oakland, CA (1 per 71 households)

This data helps to reinforce two ideas.

1. Too much real estate speculation in a given area may subject that region to an excess of foreclosures in the future.  Real estate investors can watch for this pattern and adjust their investment decisions accordingly.
2. If you lose your job, you may lose the means to pay bills.  Therefore, be sure that you are proactive about creating emergency savings.  Banks don't care how much equity you have in your home -- they only care that you make monthly interest payments.

And, lastly -- one last theory to toss out there for home buyers in "rapidly growing" areas.  That small tax bill won't last forever and when it adjusts higher, it may just push your budget into the red.  That is a leading cause of foreclosure, too.