Study: Selling price may indicate foreclosure risk

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If you live in the city of Pittsburgh or in eastern Allegheny County, odds are the bank will foreclose on one in every seven homes that sold around you since 2000.

For Braddock, Wilkinsburg, Homewood, Lincoln-Lemington-Larimer, the Hill District and Central Northside, it's about one in every two or three homes. In Edgeworth or Shadyside, that number radically adjusts to one foreclosure for every 153 and 125 homes sold, respectively.

A recent study of foreclosed properties in Allegheny County over the past seven years performed by RealSTATs shows that neighborhoods and sales prices are key indicators of which homes are more likely to be taken back by the bank.

The analysis of Allegheny County real estate concluded that 90 percent of the homes bought since January 2000 that wound up in foreclosure originally sold for less than $100,000.

"Frankly, I was shocked by that [high percentage]," said Daniel Murrer, vice president of RealSTATs, a real estate information service.

The average price of a home in Allegheny County over that same time frame was $128,949. The median price was $96,000, which means the bulk of foreclosures were on homes bought either at or below the median price.

"It may be that the people buying in that price range are stretching a little further to get their homes," Mr. Murrer said.

In Penn Hills, Verona and Coraopolis, one in every seven homes was lost to foreclosure. In North and South Fayette, it was one in every 34 homes sold. One in 65 homes in Franklin Park and Sewickley Heights was repossessed.

Another finding in the RealSTATs examination showed the highest percentage of foreclosured homes in the lowest price range ($10,000 to $49,999) occurred among homeowners who had owned their homes for more than 16 years.

They accounted for 19.9 percent of all foreclosures in that price range, while people who owned their homes (in the $10,000 to 49,999 price range) for only two years before being foreclosed on accounted for only 3.6 percent of those foreclosures.

"That's a pretty disturbing fact," said Anthony Cimino, a broker/owner of Remax Heritage and president of the Realtors Association of Metropolitan Pittsburgh.

"That may be an example of someone who owned their home for a long time and they refinanced it for substantially more than it's worth," Mr. Cimino said. "Maybe they took the money, spent it and if interest rates on their adjustable rate mortgage went up, they got into a difficult situation."

According to the RealSTATs study, roughly 70 percent of foreclosures in the $200,000 to $299,999 price range occur within the first five years of homeownership, 65 percent in the $300,000 and over range, and 62 percent in the $100,000 to $199,999 price range.

In almost all price ranges of homes, the highest foreclosure rates occur in the second through the fifth years of ownership.

"Traditionally, lesser priced homes have greater foreclosure rates," said Helen Hanna Casey, president of Howard Hanna Real Estate Services. "It would be unusual to see [a majority of foreclosures] in higher priced homes, but we are seeing more.

"Over the last couple of years, because of the availability of financing, some people have borrowed heavily against their homes for other things in life. That puts them at additional peril because everything is weighted against their house."

A big part of the foreclosure problem was 100 percent financing, but predatory lending and outright fraud played a role in the foreclosure crisis in low-income neighborhoods, said Bob Moncavage, an owner/broker for Priority Realty in Castle Shannon.

While no neighborhoods are immune to foreclosures, in more affluent neighborhoods the most likely culprits are job loss and divorce, he said.

"People have maxed out their equity and a lot of times created equity where there wasn't any," Mr. Moncavage said. "They hit a snag financially and they can't sell or refinance. There's nothing they can do. You can't refinance something that's already maxed out."


Tim Grant can be reached at tgrant@post-gazette.com or 412-263-1591.


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