Foreclosures Dragging Down Home Value

14 11 2007

Homeowners in Northeast Florida will lose about $2,000 of value in their homes because of foreclosures on subprime borrowers, according to a report by the Center for Responsible Lending.

The center estimates that there will be 6,300 foreclosures in the five-county area on homes financed by subprime loans and that the value of homes will drop an average of $2,063.

Duval County will have most of the foreclosures — about three-quarters, according to the study — but the biggest average drop in value will be in St. Johns County, where values are projected to drop by nearly $2,700.

The center also says the area will lose about $450 million in its tax base over the next several years because of subprime foreclosures.

The state of Florida could lose $23.5 billion from its tax base, the fallout of an expected 98,000 foreclosures coming from subprime mortgages made in 2005 and 2006.

Nationwide, the center says the subprime foreclosures will cause 44.5 million homes to lose $223 billion in wealth over the next few years, most of it in 2008 and 2009 and with the most severe impact in minority communities.

The $223 billion loss affects many cities and communities, as lower property values translate into less revenue to fund schools, hospitals and other government-funded programs. The center said that, as a result of subprime foreclosures, 42 counties and about half the states will lose more than $1 billion each in reduced property values.

“These losses are particularly tragic when you consider that most subprime foreclosures never should have happened,” said Martin Eakes, the center’s CEO and head of Self Help, a credit union and nonprofit lending fund, in a release. “The subprime industry became intoxicated with large fees from dangerous loan products. Unfortunately, lenders and Wall Street aren’t the only ones suffering through the hangover; 44.5 million innocent bystanders are feeling the pain, too.”

Source: Jacksonville Business Journal

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