Monday, November 3, 2008

Rising Foreclosures

There seems to be a bit of a prejudice that foreclosures are limited to lower income neighborhoods. Exclusive communities are perceived as immune to the unfortunate circumstances of increased foreclosures. Maybe people think that if you make more money you know how to handle it better. Maybe it is a perception of economic class and stability. But these beliefs are beginning to change with the growth of foreclosure numbers in upper crust Bergen communities. Bergen is often thought of immune to economic problems, but as the following article from The Record Titled No place to hide from foreclosures we can see the problem is spreading regardless of income and status. Lets take a look -

There were 2,422 foreclosure filings in Bergen County and 3,883 in Passaic from January through August of this year, according to RealtyTrac, which tracks foreclosures nationwide.

By contrast, in the same period last year, Bergen County saw 571 filings and Passaic, 2,594. Those numbers include all foreclosure actions, from the initial bank notice that a homeowner is late on mortgage payments, all the way through to a sheriff’s auction.

In New Jersey, foreclosures have had the heaviest impact on urban and working-class towns. In those places, low-income homeowners stretched beyond their limits to buy houses, or borrowed against their homes to pay other bills.

But middle-class and even wealthy areas are not immune. Foreclosure actions have been filed this year in Woodcliff Lake, Tenafly, Franklin Lakes and Saddle River, among other affluent towns.

Foreclosures are a tragedy for the family involved, of course, but they also affect nearby properties. When banks buy the homes at auction, they put them back on the market, usually priced aggressively for a quick sale. That tends to depress the prices of neighboring properties.

One big issue of foreclosures is the domino affect it creates in neighborhoods. One foreclosure drops the comp price in a neighborhood which in turn depreciates the value of other houses, reducing values that can increase foreclosure levels. Not only does it have the negative economic impact but is also fragments neighborhoods and communities as people are forced to leave. Once a occasional issue in poorer neighborhoods it is becoming common in wealthier areas.

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