The nation is abuzz with the positive news that rising home prices will solve our foreclosure issues and the parallel economic crises. However, according to a new report released by UC Berkeley’s Haas Institute for a Fair and Inclusive Society, millions of families across the country owe more on their mortgages than their homes are currently worth and continue to face crippling financial devastation.
This report, released Thursday, May 8, examines national economic trends and identifies the most troubled geo-graphic “hot spots.” These areas– metro areas, cities, and neighborhoods in all regions of the country—are still home to a large number of underwater families.
From the report:
Despite home prices rising in many parts of the country, the total value of owner-occupied housing still remains $3.2 trillion below 2006 levels. Despite rising home prices, there are still some 9.8 million households underwater, representing 19.4 percent of all mortgaged homes—nearly one out of every five such homes. Underwater homeowners are significantly more likely to default on their mortgages than homeowners with positive equity.
In the first report of its kind, the Haas institute analyzes negative equity and foreclosure data together with race and income data, at the ZIP code level, the city level and the metropolitan area level. The report shows that if we drill down to the neighborhood level, a startling number of communities across the country still face very high underwater rates.
The report also clearly shows that the legacy of predatory lending has resulted in a disproportionately negative impact on African American and Latino communities. For example, of the 100 cities with the highest underwater rates, in 71 of them the population is more than 40 percent African American and Latino.
Almost five million families have lost their homes to foreclosure since 2008, and foreclosures continue at rates higher than prior to the Great Recession. For African Americans and Latinos specifically, between 2005 and 2009, they experienced a decline in household wealth of 52 percent and 66 percent, respectively, compared to 16 percent for whites. This reflects, in large part, disparities in foreclosure rates among these groups, since for most Americans, and particularly for people of color, their homes are their largest source of wealth. Homeownership constituted 92 percent of the net worth for African Americans and 67 percent for Latinos, compared to 58 percent for whites.
While some communities across the country have benefited from rising home prices, this upward trend is expected to slow down dramatically in 2014, which means the hot spots that have been left behind by the recovery are not likely to see their fortunes substantially improve any time soon. Market forces alone will not bring the recovery to these severely impacted communities.
In 57 cities, at least 30 percent of all mortgaged homes are still underwater.
Nearly 1 in 10 Americans live in the 100 hardest-hit cities (28.7 million).
34 percent of the 100 hardest-hit cities have median household incomes below $40,000.
The 100 hardest-hit cities are in 27 states.
In 151 ZIP Codes, at least 50 percent of all mortgaged homes are still underwater.
10.4 million people live in the 395 hardest-hit ZIP codes.
43 percent of the 395 hardest- hit ZIP codes have median household incomes below $40,000.
Hardest-Hit People: Communities of Color
In 71 of the 100 hardest-hit cities, African Americans and Latinos account for at least 40 percent of the population.
In 146 of the 395 hardest-hit ZIP codes, African Americans and Latinos account for at least 75 percent of the population.
In 64 percent of the 395 hardest-hit ZIP codes, African Americans and Latinos accounted for at least half of the population.
For more information, visit http://diversity.berkeley.edu/haas-institute.