A report released today by the Center for Responsible Lending estimates that a rush of foreclosures will cause U.S. house values and accompanying tax revenues to drop by $223 billion, with minority communities expected to be hit the worst.
The report notes that about one in three households will see property values sink by $5,000 on average, thanks to resetting adjustable-rate mortgages and subsequent foreclosures.
“These foreclosures are wiping out wealth that people often took a lifetime to build,” said Martin Eakes, the Center’s chief executive. “Many families will never achieve homeownership again.”
Some 8,396,887 homes in California alone are set to lose over $67.6 million in value and tax revenues, with nearly half coming from Los Angeles County.
The data, which estimates that 44.5 million homes will see property values decline, is based on research which indicates that each foreclosure lowers the value of neighboring properties by 0.9 percent, and a greater 1.4 percent in less affluent areas.
“It is beyond the scope of this research to analyze the spillover impact of subprime foreclosures on African-American and Latino homeowners in particular, but we note that communities of color will be especially harmed, since these communities receive a disproportionate share of subprime home loans,” the study said.
The Durham, N.C.-based group is also behind new legislation set for a House vote on Thursday that would ban predatory lending practices such as steering.
“We’ve only begun to see the beginning of foreclosures,” Eakes added.