Until recently, media coverage of the Real Estate crisis has focused on the "Sand States" - Arizona, California, Florida, and Nevada. But who's next? As we explained in our recent article on "The New Normal," fresh numbers from Core Logic have made it clear that the problem of underwater homeowners and continued record high foreclosure rates was spreading, and over 34 states now have negative equity rates of over 10%.
Today, we're going to look ahead of the headlines and introduce our top three picks for "The New Problem States" -- the Real Estate markets we're looking to for explosive short sale growth moving into 2011. First up...
1. Michigan. When it comes to employment, Michigan is the biggest "Problem State" in the country, by far. They have already been the single hardest-hit state economy for over a decade now. They've lost over 800,000 jobs just since January 1st, 2000, and currently reporting 14% unemployment, which puts them first in the nation.
The Real Estate crisis in the greater Detroit area has been headline news for years now. As the Wall Street Journal reported a few weeks back: "Mayor Dave Bing has pledged to knock down 10,000 structures in his first term, part of a plan to “right-size” the city where nearly 30% of the housing stock is vacant." If 10,000 demolitions sounds ambitious, the big picture is even more amazing: experts estimate there's over 90,000 abandoned and vacant properties in the Detroit metro area alone.
2. Ohio. West Virginia and Ohio share a dubious distinction: they just recorded their lowest unemployment levels since August 1994. After that, though, the numbers get very different. West Virginia has relatively low unemployment, since their population is less than 2 million. Meanwhile, Ohio is hovering at 10.9% unemployment, which adds up to 5.3 million VERY contested jobs for 11.5 million people. Also, Ohio ranks dangerously high in terms of underwater homeowners -- currently 7th in the nation according to recent Core Logic numbers:
3. Indiana. When it comes to job losses, they're actually in third place after Alabama, but we think the turbulence will be greater in the Indiana market. This is because of their greater population density and historically stronger economy. In a small glimmer of hope, Indiana finally saw job growth in January 2010...but it was only 5,000 new jobs. Problem markets in cities like Gary will take many years to recover, but Indiana is not all bad news. They've also got an unusually business-friendly state economy, with low business taxes and a strong manufacturing base. Expect to see a lot of economic turbulence there for the next 5 years.
If you're interested in learning more, start with the latest unemployment numbers from the Department of Labor. Remember, we focused on unemployment because statistically, not having a job is the most important factor affecting mortgage delinquencies and future foreclosures. We'll close with this infographic from an excellent article in the Christian Science Monitor recently:
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