The Federal Reserve Bank of Richmond

In partnership with
George Mason University

presents

The Widespread Impact of Mortgage Foreclosures:

From Credit Markets to Local Communities

November 7, 2008
The Federal Reserve Bank of Richmond
In partnership with
George Mason University

Foreclosures in the Washington

g
Metropolitan Region

John C. McClain, AICP

Senior Fellow and Deputy Director
Center for Regional Analysis
School of Public Policy, George Mason University

November 7, 2008
How we got
here
 New Housing
g Contract Kick-Out Rate
Washington MSA
% All Housing
g Types
yp
2006 2007 2008
70 66

60
50 44
40 35
32
28 29
30 25 25 23 24
21
18 17 18 18 19 17 16 14 15 14 17 17
20 11
10 9 11 11
10 7 4 4 7 7

0
May

May

May
Nov

Nov
Jan

Jan

Jan
Jul

Jul
Sep

Sep
Mar

Mar

Mar
Oct

Oct
Aug

Aug
Dec

Dec
003
004
005

Feb

Jun

Feb

Jun

Feb

Jun
Apr

Apr

Apr
O

O
M

M
A

A
M

M
D

D
N

N
20
20
20

S
J

J
F

F
A

A
J

J
Source: Hanley-Wood, GMU Center for Regional Analysis
Metro Washington Foreclosure Rate
• The Housing Market
• Foreclosures
• The Outlook
The Washington
g Area
Housing Market
 Average
g Sales Price - September
p
All Housing Types 9-Yr Avg.
$ = 6.0%/Yr
g
Washington Metro

Source: MRIS, GMU Center for Regional Analysis

 Average
g Sales Price Percent Change
g
Washington MSA
% All Housing
g Types
yp
A
Annual
l Ch
Change A
Annuall Ch
Change b
by M
Month
th

2007 2008

Source: MRIS, GMU Center for Regional Analysis

 Sales and Total Active Listings
g
Washington MSA, September Each Year
1000s

Listings

Sales
 Units Sold Percent Change
g
By Subregion
% All Housing
g Types
yp
2007 2008 NVA

MSA

SMD

DC
Total Active Listings
g Per Sale
September Each Year

PW

LDN

FFX
ARL
 Existing Homes – Average Sales Prices
August 2007 – August 2008
$
+ 3.8
38%
- 13.4 %
- 30.5 %
413

287

Source: MRIS, GMU Center for Regional Analysis

 Existing Homes – Sales
A
Augustt 2007 – August
A t 2008

- 7.7%

+ 41.0
41 0 %
- 17.6 %

Source: MRIS, GMU Center for Regional Analysis

 Fairfax Countyy
September Existing Sales Statistics
2007 2008 %
Change
Average Price $526,700 $382,900 -27%
Median Price $435,000 $326,000 -25%
Sales 729 1257 72%
Days on Market 89 96 8%
Sales by Price Range
>$500,000
$ 281 268 -5%
$400-$500,000 164 148 -10%
< $400,000
$400 000 284 841 +196%
Sept 2008 Average Price = February 2004
Foreclosures
 Foreclosure Situations - Historical

• Divorce
• Lost Job
• Economic Downturn
• Major Unexpected Expenses (e.g., medical)

And foreclosure rates were very small

 Foreclosure
o ec osu e Situations
S tuat o s - Cu
Current
e t

• Greater proportions of sub-prime

sub prime loans
• Greater new home building activity
– Purchase by speculators
– Purchase by first-time/other home buyers using sub-
prime mortgages and over-reached.

Refinancing also a phenomenon in which owners

refinanced with a sub
sub-prime
prime mortgage
mortgage, taking money
out for other expenditures, and then prices dropped.
Nationally this is estimated to be more than ½ of all
foreclosures.
 Wide reaching Impacts of the
Wide-reaching
Foreclosure Situation

• Families and Households

• N ti
Nationall and
dLLocall E
Economies
i
• Budgets of Local Jurisdictions
• Well-being of Neighborhoods
• Homeowners
• Potential Homebuyers
 Metro Comparisons
g g Foreclosure Rates
Mortgage
Q1 2007 and Q1 2008
Foreclosures /10,000 Owner Occupied Units
Washington
U.S.
2007: 58
2008: 87

Source: RealtyTrac, GMU Center for Regional Analysis

 Foreclosure Rate by Quarter
W hi t Metro
Washington M t Area
A
Foreclosures/10,000 o-o units

2006 2007 2008

 Mortgage Foreclosure Rates
by County – April 30
30, 2008
Foreclosures /10,000 units

Source: RealtyTrac, GMU Center for Regional Analysis

 Mortgage Foreclosure Rates
by County – April 30 & September 9
Foreclosures /10,000 units

Source: RealtyTrac, GMU Center for Regional Analysis

Th Washington
The W hi t Economy
E
 U.S. Gross Domestic Product
Quarterly Change: 2006 – 2010
Forecast > > > > >
%

2006 2007 2008 2009 2010

Source: Global Insight

 Annual Job Change
g
Washington Metro Area
000s
Annual Change Annual Month-over-the-Year
Month over the Year
100
2007 2008

80
71
63
60 56
50
45
40 41
40 35
29 28 27 27
26 26 27 25 27 25 27
21 21 22
18
20 12
10 8

0
ar

ar
20022
20033
20044
20055
20066

May y

May y
Febb

Junn

Febb

Junn
pr

pr
Novv
Jann

Jann
ul

ul
Sepp

Sepp
Aug g

ct

Aug g
Decc
Ju

Ju
Oc
Ma

Ma
Ap

Ap
Source: BLS, GMU Center for Regional Analysis
 15 Largest Job Markets
Job Change Sept
Sept. 07
07– Sept.
Sept 08
Thousands
100
80 W hi t + 40,700
Washington 40 700

60
40
20
0
-20
-40
-60
60

Ranked by Total Jobs

 15 Largest Job Markets
Ranked by Unemployment Rate
%
September 2008
10
9
8
7
6 U.S.
5 6.0
4 4.0
3
2
1
0

Source: BLS, GMU Center for Regional Analysis Data not seasonally adjusted
 THE OUTLOOK

• Housing Market Continuing to Adjust

• Underlying Economic Fundamentals OK
• Federal Policy Progress
www.cra-gmu.org
g g