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The latest data for RealtyTrac shows a sharp jump in foreclosure activity, up 19% in May from the previous month and nearly twice the number of May 2006. Sad news for the 171,000 U.S. homeowners who received default notices or other foreclosure-related filings last month.
There’s been some debate in the real estate industry as to what the data tells us. Has a bubble burst, as most people suspect? Are toxic, adjustable-rate mortgages taking their toll on speculators and others who overextended themselves in boom markets? Or is the data just a reflection of continuing tough times in rust belt states such as Illinois, Michigan and Ohio where folks are losing their jobs due to globalization. All three of those states appear among the top ten in terms of percentage of homes in foreclosure.
Drilling down deeper, even California, home to the largest number of foreclosure filings, suggest that those in trouble aren’t mansion-flippers in Beverly Hills, but blue collar folks in agricultural-dependent communities such as Merced, Stockton, Modesto and Riverside.
Alas, it’s not that easy. As the “heat map” provided by Realtytrac shows, once-booming markets such Arizona, Florida, Texas and Nevada are showing a lot of red—meaning a higher percentage of homes in the foreclosure process. The realty reality is that the farmers in Modesto can be in trouble as well as the speculators buying condos in Miami, Phoenix and Las Vegas. A slowing market impacts all.