Magazine article Economic Trends

Shadow Inventory Still Weighing on Ohio Housing Prices

Magazine article Economic Trends

Shadow Inventory Still Weighing on Ohio Housing Prices

Article excerpt

07.11.11

Home prices continue to trend down, both nationally and across Ohio. Indexes produced by the Federal Housing Finance Agency (FHFA) show that prices in both the state and the nation declined by more than 5 percent from the first quarter of 2010 to the first quarter of 2011. As a result, Ohio's home prices have fallen roughly to the levels that prevailed in 2000. This is unusual relative to the other states in the nation. Only a few have fared worse than Ohio over this 10-year period, when 45 states saw gains of 10 percent or more and the U.S. average gain approached 25 percent.

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Some of the downward pressure on Ohio's home prices may be traced to above-average foreclosure activity from early in the last decade. During the 1990s, foreclosures occurred at a somewhat slower pace in Ohio than in the U.S. But by the mid-2000s, foreclosures were occurring at about twice the national average. Ohio's stock of seriously delinquent mortgages--those in the foreclosure process and more than 90 days delinquent--ballooned. As these properties emerged from foreclosure and appeared on the market again, they likely kept Ohio's home prices from rising as rapidly as they otherwise might have. They also probably reduced the number of new housing projects. Following the 2001 recession, housing starts stayed relatively flat in Ohio, in contrast to the construction boom seen in some parts of the U.S.

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The stock of serious delinquencies--sometimes referred to as a shadow inventory--is even larger today than in the mid-2000s. It remains near record highs, in both absolute and percentage terms, though the proportion of seriously delinquent mortgages has improved in recent quarters. This improvement is related to declining delinquency rates, and consequently, fewer new inflows of properties into foreclosure. …

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