Real estate foreclosures hit home in Ohio

Job losses, lending practices share the blame

Wednesday, February 02, 2005

By Glenn Roberts Jr.
Inman News

Ohio home sales activity in 2004 reached record levels for the fourth consecutive year, according to state multiple listing service statistics. But these impressive numbers are countered by an unsettling trend: a growing number of foreclosures.

While the Ohio Association of Realtors MLS reported that new and existing home sales were up 7.7 percent statewide in 2004, industry professionals say the foreclosure rate is on the rise, too, with job losses and lending practices playing a role.

Foreclosure.com, which maintains a database of residential foreclosure properties across the country, reported that the inventory of residential foreclosure properties available for sale in 2004 reached an annual peak in December, and Ohio had the second highest total inventory of properties, behind Texas. Ohio had 7,277 total foreclosure properties as of December 2004, while Texas had 9,928, Georgia had 6,039, Michigan had 6,028, North Carolina had 5,355, and Indiana had 5,137, Foreclosure.com reported.

Also according to Foreclosure.com data, Ohio had 23,518 total new foreclosures in 2004, compared with 10,396 total new foreclosures in 2003, and 5,989 total new foreclosures in 2002. The number of active foreclosures in Ohio grew from 3,601 in January 2004, to 7,277 in December 2004, while the number of new foreclosures in Ohio grew from 911 in January 2004, to 2,819 in December 2004.

"Over the past two to three years is when we've seen a huge jump -- the number of foreclosures at Sheriff's sales is just unbelievable," said Steve Spinelli, president of the Akron Area Board of Realtors. Spinelli said that the number of foreclosed homes that wind up in Sheriff's sales each week has roughly tripled in the past five years.

"There is a lot of job loss. Predatory lending is probably the biggest problem," Spinelli said, adding that the Realtor board is working to educate consumers about what they can do to avoid a foreclosure process.

Some lenders are fly-by-night operations that are taking advantage of the robust housing market, Spinelli said. "When the interest rates are good we see these lenders getting into the business. Then they're out of business in a year or two. Those companies are just taking advantage of low rates, taking advantage of consumers."

Steve Spinelli, Akron Area Board of Realtors

Spinelli said that consumers can get into the spiral of foreclosure by taking out home equity loans and failing to use the money to improve their homes. "Once the buyers have moved into the house, they're bombarded with information or solicitations to take out a home equity loan or refinance. They don't expect that a year down the road they're going to lose their job and they're belly up," he said.

Whereas foreclosures in the past have hit mostly low and very-low income homeowners, there is now a trend toward more middle-class homeowners falling into foreclosure processes, he said. "We're also seeing some homes (foreclosed) in the upper-scale price range," he said.

"We're using our local newspapers to try to educate the public. As a board we're trying to reach out to our lending community to try to put a stop to this," said Spinelli, a Realtor for Smythe, Cramer Co. in Akron. The state Realtors association is well aware of the foreclosure problem, too, he added.

The state of Ohio has reported that the state's unemployment rate was 5.9 percent in December 2004, an improvement over the 6.2 percent reported in December 2003. Still, some areas of the state are experiencing much higher rates. According to state civilian labor force estimates for counties and cities with population over 50,000, Cleveland had an unemployment rate of 11.6 percent in December. Dayton had a 9.9 percent unemployment rate, Toledo had a 7.8 percent rate, Akron was at 7.1 percent, and Columbus had a 5 percent unemployment rate.

Meanwhile, the national unemployment rate hovered at 5.4 percent in November and December, compared to 5.7 percent at the end of 2003. Bloomberg reported that the nation has lost 122,000 jobs since January 2001, and employment is down 226,000 from March 2001 numbers.

Bob Pritchard, a Realtor for Coldwell Banker King Thompson in Columbus, Ohio, who specializes in foreclosure properties, said, "Toward the end of the first quarter of last year (foreclosures) really picked up -- business really began to boom for me," Pritchard said.

The loss of factory jobs is partly to blame for some of the foreclosures, he said. Also, Pritchard said he has seen a number of foreclosures in the case of first-time homeowners who bought their homes with three-year adjustable rate mortgages and found themselves over-extended. "They bought a home they could just barely afford," he said.

Seminars have been held in the Columbus area to promote the availability of foreclosure properties as an investment, he said. The rash of foreclosures in the state has created a rush among real estate investors who hope to find a good deal on foreclosed properties. "Everybody's looking for a bargain. We've had a humongous increase in investors and wannabe investors."

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