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Dayton Business Journal...
Foreclosures lead to
long-term vacancies
by Ginger Christ, DBJ Staff Reporter
Wednesday, July 27, 2011
The rise in foreclosures could lead to a long-term increase in
vacancies, according to Federal Reserve Bank of Cleveland researcher
Stephan Whitaker.
Even though foreclosures can be attractive buys given their low prices,
many remain unoccupied for months, even years, after being purchased.
According to Whitaker’s research, foreclosures maintain about a 15
percent higher vacancy rate for at least four years after their sale
than other homes in the same neighborhood.
The is significant for Ohio, and Dayton, as one in four homes in the
Buckeye State were repossessed or in the foreclosure pipeline during
the first quarter of this year.
To determine vacancy, Whitaker used vacancy data from the U.S. Postal
Service, analyzing 85,000 properties and 130,000 sales transactions in
Cuyhoga County from 2006 through 2010.
For six to nine months prior to a sale, vacancy rates in homes that
sold by traditional means and those that were foreclosed upon were
about the same. However, within six months after the sales, vacancy
rates in foreclosed properties rose roughly 25 percent above vacancy
rates in non-foreclosures.
Whitaker’s findings were true not only in high-poverty areas, but also
in medium- and low-poverty neighborhoods.
Becuase foreclosure and vacancy are tied to lower property values,
Whitaker suggests implementation of policies to keep homes out of
foreclosure. However, he urges against policies that will lower sales
prices, which could worsen the neighborhood stabilization problem.
The Dayton region had more than 9,400 properties for sale at the end of
June, a supply of 8.8 months. The inventory levels were down from May —
when there were 9,500 listings, or a 9.2-month supply — but still up
from June, 2010, when the area had an 8.4-month supply.
To lessen the foreclosure burden, Fannie Mae said last month it is
boosting incentives for potential buyers of foreclosed homes it owns as
part of an effort to sell more of the foreclosed properties.
The company began offering incentives in 2010 to buyers who close on
one of the foreclosed houses in its portfolio.
It is also reviving incentives to real estate agents who bring a buyer
to the table.
For sales of Fannie Mae-held properties that close on or before Oct.
31, Fannie May will give qualified homebuyers up to 3.5 percent of the
final sales price to put toward closing costs. Selling agents
representing can get bonuses of up to $1,200.
There are 156 Fannie Mae properties for sale in Montgomery County
alone, and hundreds more throughout the rest of the Dayton region.
Fannie and Freddie Mac were seized and put into government
conservatorship in September 2008. The Treasury Department holds a
nearly 80 percent stake in both companies. A move has been underway to
privatize the two. An effort to privatize the mortgage industry could
be a boost to some banks with a large mortgage presence in the Dayton
region, such as Bank of America , Citigroup Inc. , Huntington
Bancshares , Fifth Third Bancorp , PNC Financial Services Group Inc.
and JPMorgan Chase & Co.
Click here for more from the Cleveland Fed report.
Read it with links at the Dayton Business Journal
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