Housing Bubble: Not Cause of House Repo Increase in Ohio
The Federal Housing Agency released a report which concluded that Ohio’s problems of house repo increase and decline in housing values are rooted in the economic crisis and easy credit. The report debunked the myth that Ohio’s problems were caused by a housing boom.
According to the Federal Reserve Bank of Cleveland, there was not a housing boom in Ohio and so it could never be blamed for the current foreclosure and housing crisis in the state.
Federal Reserve Bank of Cleveland senior research economist Emre Ergunor explained that Ohio experienced a credit boom and not a housing boom. He pointed out that the credit boom still supported house prices. However, he clarified that Ohio did not get the kind of credit boom similar to that in California and Florida.
Data from the Federal Housing Finance Agency showed that Ohio’s home market prices increased 3 to 4 percent annually during the national housing boom from 2003 to 2005. Meanwhile, California’s home values jumped 14 to 21 percent annually and 12 to 27 percent yearly in Florida.
And since the last quarter of 2006, the home market value dropped by almost $4.2 trillion.
Meanwhile, many homeowners in the country have lost their properties to foreclosures.
Data from RealtyTrac Inc. showed that 342,000 homeowners received notices of foreclosure in April. Additionally, foreclosure filing rate for last month accounted for 1 in every 374 housing units.
The Federal Reserve Bank of Cleveland, which has jurisdiction on the regions of western Pennsylvania, Ohio, West Virginia’s northern panhandle and eastern Kentucky, has recommended several measures to address the house repo problems in the area.
The Fed recommendations included modification of loan terms of distressed homeowners facing foreclosure, demolishing vacant houses, aggressive enforcement of housing codes and allowing homeowners to rent and stay in their properties.
Ergungor explained that these recommended measures will not address and eradicate the fundamental causes of house repo problem and sliding housing prices.
However, he pointed out that the first goal of the Fed is to prevent the further decline of home values. After the goal to stop housing value declines has been achieved, the next step will be determined by the state’s demographics and economy.
According to the report, the state’s house repo problem started in several Ohio counties in 2000, driven by the rise in unemployment and not by the national housing boom.
