Fear The Government Shutdowns! Gov’t Shutdowns May Cause Surge In Mortgage Defaults AND Zombie Properties

by confoundedinterest17

(Inman) About 1.6 million residential properties in the U.S., or about 1.6 percent of all homes, are currently vacant, according to a new report from Attom Data Solutions.

The Midwest and South had the highest zombie foreclosure rates during the third quarter, with rates highest in Iowa (15.5 percent of vacant properties in the foreclosure process), Kentucky (12 percent), Missouri (10.2 percent), Georgia (9.6 percent) and Maryland (9.2 percent).

States with the lowest zombie foreclosure rates were largely in the Northeast and West, including Utah (1.3 percent of vacant properties in the foreclosure process), Colorado (1.6 percent), New Jersey (1.7 percent), Idaho (2.2 percent) and California (2.2 percent).

In terms of number countstates with the highest numbers of zombie properties during Q4 were largely in the Northeast and Midwest in areas hit hard by the pandemic. New York posted the highest number of zombie properties at 2,131, followed by Florida (1,027), Illinois (934), Ohio (836) and New Jersey (346).

“Some of the states with the highest rate of zombie foreclosure properties are also states that have been among the hardest hit by the COVID-19 pandemic,” Rick Sharga, executive vice president for RealtyTrac, said in a statement. “When the government bans on foreclosure activity expire, it wouldn’t be a surprise to see the number of defaults in those states increase more rapidly than in other parts of the country, and the number of zombie foreclosure properties rise more dramatically in those states as well.”

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Here is a chart I did yesterday pointing to the perils ahead if the shutdowns continue and Federal stimulus abates. Forbearance has prevented a spike in defaults (and potential zombie properties), but we will find out in January.