This morning, RealtyTrac released its Q3 2007 foreclosure data for the United States.

The leading cities for foreclosures are:

  1. Stockton, CA (1 per 31 households)
  2. Detroit, MI (1 per 33 households)
  3. Riverside/San Bernardino, CA (1 per 43 households)
  4. Fort Lauderdale, FL (1 per 48 households)
  5. Las Vegas, NV (1 per 48 households)
  6. Sacramento, CA (1 per 48 households)
  7. Cleveland, OH (1 per 57 households)
  8. Miami, FL (1 per 60 households)
  9. Bakersfield, CA (1 per 64 households)
  10. Oakland, CA (1 per 71 households)

Looking more closely, we can see pattern.

California, Nevada, and Florida are well represented and that makes sense.  Between 2002 and 2006, these areas were popular with speculators, many of whom used 2- and 3-year adjustable rate mortgages that did not require income verification, nor did they require downpayments in excess of 5 percent.

These loans are now adjusting and in 2007, mortgages for investors are more stringent.  They typically require a 10-20% equity position and verifiable income. 

With no mortgage options, no buyer bailouts, and no means to pay the bills, many speculators are choosing to walk away from their investments.  Hence, the high foreclosure rates in California, Nevada, and Florida.

Rounding out the top 10 are Detroit and Cleveland. 

Foreclosures in these cities make sense, too.  Both have been decimated by job losses in the auto and manufacturing industries and without jobs, homeowners can’t pay the bills.

In other words, foreclosures are often not the result of a “bad mortgage”, but instead a “bad investment” or a “bad economy”.

The entire list of foreclosures by MSA are available on RealtyTrac’s Web site.

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