Home foreclosure hot spots

By Stephane Fitch

updated 8:50 p.m. ET June 1, 2006

Turns out, plenty of homeowners are suffering despite the recent boom in house prices.

According to Foreclosure.com, a Boca Raton, Fla.-based data service that tracks delinquent mortgage holders, at the end of April there were 87,582 American homes in some phase of foreclosure. Though nationally the number is up just 2.6 percent from six months ago, in a few cities, foreclosure filings have jumped up by 26 percent and more.

If you’re flush and hoping to get in early on what may be a bear market in real estate, there may be an opportunity for you in all this. (Read Forbes' recent guide on getting into foreclosures and other smart moves for a falling market, "Prospering in the Housing Bust").

Rising interest rates — up more than a percentage point on most mortgages since a year ago — and a slowdown in booming prices are probably to blame. In 2002, a couple with solid credit using a one-year adjustable-rate mortgage and 10 percent down on the purchase of a $154,000 house (the national median at the time) was facing a manageable mortgage payment of $735 a month. If they got into a money squeeze, they could borrow against the rising value of their house — median prices have jumped to $217,000 since.

ABOVE-AVERAGE FORECLOSURE RATES Click the links below for more information. Detroit Dallas-Fort Worth Cleveland Pontiac, Mich. Pittsburgh Houston San Antonio Minneapolis Source: Forbes.com

Today, that same couple would be facing a mortgage payment of around $1,100, plus higher property taxes. With house price appreciation slowing, there’s nowhere to turn in a financial crunch.

The jump in costs is most dramatic in cities such as Los Angeles, New York and Miami, where the rate of appreciation has far outpaced the national average. Foreclosure.com Chief Executive Brad Geisen guesses there will be more pain on the way, even in some of the cities where prices have spiked.

Foreclosures work differently from state to state, but the basics are pretty standard: When a homeowner starts missing mortgage payments, the bank gives notice to the homeowner and to the local government that the loan is delinquent. After a time, the bank is allowed to commence a repossession process that can result in the house being auctioned off to the highest bidder. The process can take weeks or months to play out; anywhere along the way, a homeowner retains the power make good with the bank. Frequently, homeowners in trouble with the banks are willing to sell their homes to private buyers at a discount to market value in order to preserve what little equity they have left.

FORECLOSURES GROWING FAST Click the links below for more information. Sacramento San Diego San Diego (suburbs) Las Vegas Source: Forbes.com

Foreclosure.com sifted through data from the 25 most populous counties in the country and found eight places where homes are falling into foreclosure at above-average rates. (In the list that follows, we name the metro area that each county corresponds to — Chicago for Cook County, Ill., for example.) We've also included a list of places that have lower-than-average foreclosure rates, but are worth a look because filings are growing so fast.

On average nationally, there are 29 houses in foreclosure for every 100,000 U.S. residents. But at the top of Foreclosure.com’s list, in hard-up cities like Cleveland and Detroit, the rate is several times that. Even some higher-growth cities, including Dallas, Houston and Oakland, are seeing high rates of foreclosures. And rapid growth in new foreclosure filings threaten to put other high-growth cities like Las Vegas, Sacramento and San Diego into the above-average camp.

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