The Vacant Dead: The 50 US Cities With The Most "Zombie" Foreclosures

Tyler Durden's picture

Over the past five years, first as a result of the 2010 robosigning scandal and then due to the natural build up of a massive backlog of cases in judicial states, which in some cases is well over 1000 days, America's conventional house clearing mechanisms of foreclosure and bank repossessions had become clogged up to previously unseen levels.

Which was precisely how the banks wanted it: after all, by minimizing the supply of housing for sale, this served as an aritifical subsidy to the housing market. It achieved two things: it kept housing prices artificially high, and allowed millions to live in their house mortgage-free for years, while also providing a "spending stimulus" to millions who in lieu of spending cash on rent (or mortgage) could purchase discretionary items.

Five years later, however, with the stock market at all time highs and the housing recovery supposedly in full swing, albeit on an artificially inflated basis due to abnormally low inventory, the banks are starting to collect.

As the following chart shows, the foreclosure completion process has suddenly soared now that banks are finally evicting deadbeats, and as a result REOs have surged 50% from a year ago to a 27 month high! Not what one would expect from a healthy, vibrant and "clearing" housing sector, it merely shows that the banks are now confident enough with the level of demand that they are happy to leak out far more of their accrued supply into the general market, something we dubbed "foreclosure stuffing" all the way back in 2012.

What this means is that suddenly millions of Americans who had been allowed by their repossessing banks to squat unbothered, are about to find that in the real world if one can't afford a house, one rents, or else finds a nice enough bridge under which to pitch a tent.

It also means that what the NAR has been complaining about for years, namely the lack of inventory, is about to become a horn of plenty, as millions of previously unavailable houses are put on the block, pushing the price of housing lower.

Most importantly, it means that if not done correctly the process may derail whatever vestige of a housing recovery the media wants the general population to believe is taking place, aside from Chinese hot-money launderers buying NYC triplexes all cash, sight unseen of course.

Nowhere will this reversal be more visible than in the places where not even the prospect of living mortgage free appealed to former homeowners.  According to RealtyTrac there were some 127,021 homes actively in the foreclosure process been vacated by the homeowners prior to a completed foreclosure, representing one quarter of all 527,047 properties in foreclosure. These owner-vacated foreclosure properties will likely end up as short sales, foreclosure auction sales or bank-owned sales, also known as even more supply.

These are the so-called "Zombie" foreclosures (not to be confused with "Vampire" foreclosures in which the owner continues to inhabit the foreclosed property).

According to RealtyTrac's Darren Blomquist "as banks push through long-deferred foreclosures that are more likely to be owner-vacated this year, we are seeing a somewhat surprising increase in zombie foreclosures in markets with overall low foreclosure rates such as Los Angeles, Houston and Boston."  Almost as if the housing recovery was not really a recovery but a giant game of extend and pretend.

And since Zombie foreclosures represent the purest form of housing unaffordability, one not perverted by the differential between a foreclosure start and a completion, but merely the dereliction of one's former house without regard to one's credit rating or any other consequences, the cities, MSAs and states where the "Zombie" problem is most acute is also those where the economic situation is getting worst the fastest.

Not surprisingly, among the states the highest zombie foreclosure rates were in New Jersey (one in every 210 housing units), Florida (one in every 324 housing units), New York (one in every 476 housing units), Nevada (one in every 495 housing units), and Indiana (one in every 574 housing units). It also goes without saying that the accumulation of such derelict and unsupervised properties will have a substantial downward impact on home prices.

So for those concerned if their city is among the top most frequented by this particular, and very unpleasant, breed of "zombies", here are the top 50 cities in the US in which zombie foreclosures represent the highest percentage of all properties in foreclosure. For those readers certainly located among the Top 10, now may be a great time to hit a bid, any bid and get out while the getting is good.

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espirit's picture

Trying to sell my home now in FL.  Realtor listed at upper end, but no bites.

Dropping by $50K this week, we'll see...

Winston Churchill's picture

3 houses on my road have been on sale for over a year.

I have no idea where houses are selling in this hot market, as my realtor client calls

it. They wouldn't lie to us would they ?

LetThemEatRand's picture

I hear housing is actually very hot in Denver and surrounding areas.  You got to legalize the marijuana, yeah.

Took Red Pill's picture

#50 Springfield, MA is planning on a casino. That will fix everything I'm sure.

Alvin Fernald's picture

Our house was on the market for 4 days before two offers and going under contract.
In WA.

Scooby Doo's picture

We have 3 for sale on our street. 1 for over a year, 1 for at least six months, 1 recently listed. But next door neighbor's house sold the day it listed.

nuubee's picture

Jesus Christ, not ONE California town? NOT ONE???

People never f-ing leave this state... We need an earthquake, hopefully nearer to the bay area.

Bay of Pigs's picture

Nothing on the west coast? LOL....

TheReplacement's picture

Springfield is an utter shithole and a casino is only going to attract people who cannot afford to go to Mohegan Sun in CT.

It would seem the drug traffickers need yet another place to launder their money after delivering the heroin to Boston and points north.

NYPoke's picture

We have 3 For Rent Signs, which I have never seen before.  Not even a bite on those, in about 3 weeks.

847328_3527's picture

My cousin lives in Houston and says there's quite an increase in the number of houses on the market, fairly new but most of them owned by O&G employees, petrol engineers, etc. They've been hit hard and the ones who did not put cash away for a long-term rainy day are getting bitten. His salary was frozen but his wife is in health care there and they save like crazy so they're in good shape.

A Nanny Moose's picture

the lesson here is to hedge your bets in marriage. Cross polinate industries.

TheEndIsNear's picture

Right now I'm short marriage.

giovanni_f's picture

Let's hope none of them gets hospitalized.

The Rolling Thunder's picture

My best friend's ex-wife makes $75/hr on the laptop. She has been unemployed for eight months but last month her income with big fat bonus was over $15000 just working on the laptop for a few hours. Read more on this site..... www.Earnmore9.com

Kirk2NCC1701's picture

ChIndia doesn't care for or invest in FL or downer places in the Rust Belt (unless it's a bunch of bankruptcies that can be rented profitably.

But they love RE along the West Coast, which they will own more of after the Reset.  This is shown in the RE prices, which are quote robust on the West Coast.

olenumbersix's picture

We live in the greater Orlando area, and we have been seeing these homes sit empty for years. I guess we have kinda gotten use to them. There are 3 of them within walking distance of my front door. Empty houses, and homeless people now doting my travels around town is so common place it has become my new normal. Don't get me wrong we've always had homeless in the winter, but not in the summer down here, it's just too hot. Now they are on every corner, everywhere, everyday.

Salsipuedes's picture

I have looked everywhere and for the life of me I still can't find that damn "price discovery." It must have been "renditioned".

MASTER OF UNIVERSE's picture

Home ownership is excessively expensive today. Few can afford to purchase while many cannot afford to own anymore. Supply has vastly outstripped demand all across North America. It's a buyers market with next to no buyers, or full time jobs that enable one to get a mortgage. Bottom line is that this is the end of home buying, and home selling in an average market. Only the high end stuff is liquid.

Dre4dwolf's picture

The only thing keeping prices up is the fact that, the people holding the homes need to sell at a given price range in order not to take a loss so the price has become sticky.

The pressure is there to push home prices down.

The owners/lenders just dont want to sell for a lower price than what the shit was sold for years ago so homes are just. .  .  sitting there empty.

 

Its stupid because these homes will be infested with pests (wasps, termites, roaches, ants, beetles etc... etc... bed bugs) and they will slowly infect the neighborhood not only destroying the value of the adjacent homes, but the homes themselves.

 

One home infested with termites unchecked will infest the entire block with termites in just a year or two. . .  what happens when an entire block cant kill the termites at the source (the abandoned home?) because its not their property?

 

 

OceanX's picture

God forbid, if a dead child turns up in one...

TheEndIsNear's picture

A sudden unexpected fire breaks out?  

My neighbor and the landlord of the house I'm renting both want to sell their houses for  $165K, but the Zillow estimate (usually high) is $138K and $140K respectively, and they both refuse to lower the price even though they've both been on the market for a couple of years. I haven't had the heart to break the news to them yet.

(Note: These houses are far, far away from any major city and that's why the prices are so low. I think it's a good place to wait out the rioting and looting that follows the next collapse. I'm on a fully fenced half acre with a 1200 sqft house, barn, two woodsheds, and a year around creek running through the back yard, and am surrounded by mountains. It's almost like living in a national park. If you don't mind the isolation, prices in the country are very cheap.)

 

Momauguin Joe's picture

Nice setup. Hopefully you're upwind from any nuclear reactors. 

Refuse-Resist's picture

Good move.  I'm in a very similar sized house, creek, rural etc.

But be careful those of you considering this.

I paid $135k for a 1400 sq ft house (solidly built in good shape) on 7 acres in 2006, with bottom land, forest, a spring, and year round creek on the property line.  Plenty of firewood, the bottomland is relatively fertile for gardening, and I've never had to pay for firewood to feed my woodstove.  There's no crime despite awful poverty --- poor whites tend to be polite and respect private property at least in this area.  The fact that all of us are well armed may have something to do with that  but I digress.

My point is that according to zillow, my house is now valued at $115k even though when I bought it it seemed like a screaming good deal to me at the time.  That's more than I owe. After paying on that bitch for 9 fucking years. I love the way banks can create 'principle' out of thin air, charge massive interest on it, and end up owning everything.

Give me a license to print money and my family will own everything around here within a generation.  Problem there is that my last name doesn't end with 'berg, 'man, or 'stein.  No money printing for me. Boohoo.

America FUCK YEAH!

buzzsaw99's picture

florida, florida, florida, lulz

neidermeyer's picture

FLORIDA FLORIDA FLORIDA FLORIDA!!!! Seven of the top 10 ... We're number 1.

Refuse-Resist's picture

I don't consider teh majority of Floridians to be southerners.  Get around Ocala or points south and you won't hear a southern accent. ON the contrary it'll be Yankee, NY in particular with a good bit of upper midwestern thrown in.

 

The southerners in Florida live in the northern part and the panhandle. The rest are Yankees, Cubans, and dindunuffins.

 

Remember that old Bugs Bunny cartoon where he saws Florida off the map and casts it adrift?  Yeah, that.

Dre4dwolf's picture

If there is one thing you know about zombies its, that they are contagious.

RobD's picture

Home sell update(final):

We finally closed yesterday, it took Chase 5 business days to cough up the money. Finally dept free.

Manipuflation's picture

Congratulations.  That is a nice feeling isn't it?  Five days is not bad at all.

Seasmoke's picture

Reminds me of all those sitting cars pictures. Just they are able to hide it much easier. 

 

Foam the runways has run out of foam and runway. Find a partner and short sell to each other and then stay in your original houses. Wish every American homeowner would wake up ASAP 

 

Fuck the banks. Fight those fuckers every inch before you ever leave that house. 

Salsipuedes's picture

Seasmoke......you are a FUCKING GENIUS! Shore leave for everybody!

grgy's picture

We sold our house in Vancouver BC in two weeks, three years ago at top dollar. I wanted to get out before the pending crash. It never came. Low mortgage rates and off shore buyers have exploded prices. It will collapse once China gets their capital controls in order and interest rates return to normal but I can't figure out when any of this will happen. Glad I'm out of Vancouver just the same.

Dr. Bonzo's picture

We did same in Hong Kong. Also got out early. Don't feel bad, in housing... when you're late... you're fucked. And since market timing is near impossible, getting out ahead is the best outcome that can be hoped for.

A Dollar Short's picture

Did you see California on that list?

 

Oh my, must be racial..

deimos178's picture

you have to be realistic and know what is the point of loss vs gain. We listed our house in Maine in Nov 2010, had an offer in 4 days and moved out of that tax hell for warmer climes. My wife watched all those shows about selling houses and learned how to stage it. Minimize clutter, remove personal items, netural colors and keep it clean. That was then, this is now, I know but it can be done. We are now in the mountains of eastern TN, lots of bitter clingers here.

Paracelsus's picture

Thought Las Vegas would be closer to the top.

Who has discretionary income these days?

Anyhow,where is the H20 gonna come from?

A good point made here is that (wise) people move out of hoods in decline,sell while you still can get a decent bid...

A point missed about non-paying squatters : at least someone is there looking after the property.While they may be living free,the banks do not need as much security expense and property maintenance expense (hopefully).

I hate seeing boarded up houses when people need a roof over their heads...

For stability: a 40% price decrease (won't happen before a crash) or                                                 a  40% income increase (won't ever happen,ever)

GotNuttin'todo's picture

After the Great Depression it took 40 years for housing prices to recover to their former levels. We are 1/6 of the way there!!

anachronism's picture

I live near Rochester, NY now. Bought a very nice home for 1/5 the sale price of the home in Brooklyn. It is much nicer than in Brooklyn. The neighborhood is beautiful and neighbors are friendly.

Homes in this neighborhood have dropped about 33% in the past 5 years. In general, homes in this area sold for 10-15% below initial asking price last year. You don't have to buy in a "zombie' neighborhood to get a very good value. Just don't expect to make your money back at 9% above your purchase price (Real Estate tax plus realtor's commission = 9%.)

Come on up to Monroe County New York! Stay for a while.

 

joebren's picture

The State of Hawaii just appointed/hired four hundred attorney to proceed with an 8,000 foreclosure backlog. Not only due zombie's owe banks big bucks, they also owe homeowers associations relatively large sums.

VegasBob's picture

I'm the executor of an estate with an underwater vacant property in Columbus, OH.

I hope the bank will foreclose so I can close out the estate.

It's almost 2 years now.

THE 4th Quadrant's picture

Finally we can get some fucking lawns mowed now?

22winmag's picture

Snipes: We're safe around here.

 

Connery: You call this safe?

 

Snipes: Rough neighborhoods may be America's last advantage.

skipjack's picture

So funny so much of FL is on that list...I just bought 36 acres with a small well-built house and 6 stall barn just outside of Ocala for a screaming deal and I wondered why. Now I guess I know. Oh well - 3 years ago the price on this place was 3x higher. And the kicker ? The real estate taxes with the homestead and ag exemptions is a mere $803 per year. Yes, no typo - $803. In MD my property taxes on 14 zacres is $16k, so I'm laughing all the way to the tax assessor's office.

 

Bye bye MD, socialist hellhole, DC lobbyist heaven, no more winter bullshit or rain tax.