The New Byproduct of Our Foreclosure Rate

As more and more homeowners felt trapped by rising...

As more and more homeowners felt trapped by rising mortgage rates and stricter lending guidelines, more and more homeowners found themselves in foreclosure — not a nice place to be.

According to the RealtyTrac Inc., Nevada — a state particularly hard hit by the housing slump — has the nation’s worst foreclosure rate, with 1 in every 61 households filing for foreclosure. Nationally, the rate is one filing for every 196 households.

And while homeowners are finding foreclosure isn’t a nice place to be, their neighbors are finding it’s not so hot to be near foreclosure, either. That’s because those newly-empty houses are bringing a new neighbor to the area: Crime.

According to a recent study by an Immergluck of Georgia Institute of Technology in Atlanta and Geoff Smith of Woodstock Institute in Chicago, violent crime rises 2.33 percent in neighborhoods where the foreclosure rate increases one percentage point. Just one!

These are all findings from a recent AP article, Squalor, Crime Follow Wave of Foreclosures, which describes one historic Ohio neighborhood that has seen foreclosures rise become plagued with "house fires, prostitution, vandals and burglaries."

Why? A few reasons:

  • Lower Rents Attract Transient Renters. With the housing supply as high as it is, banks are finding foreclosed properties aren’t selling fast — and renting is one way of making some money back while they sit on the market. And they’re willing to take what renters apply (it stands to reason credit checks and other standard measures wouldn’t be considered quite as necessary for short-term renters at a property the owner is hoping to sell as they would be with renters agreeing to a yearly lease.)
  • The Landlord Takes Federal Holidays Off. Banks that are finding themselves with an excess of foreclosed properties are also finding they aren’t landlords. Policing residents takes a back seat. Repairs do, too — which is why many foreclosure listing Web sites, like, clearly state foreclosed properties are sold as is.
  • A Visibly Empty House Can Be a Magnet. A street with several windowless houses or homes with overgrown lawns indicates to passersby that there are vacant homes — which can attract squatters and the homeless, who are looking for shelter as the winter months kick in. It seems unlikely people would wander the streets looking for empty houses; but somehow, people do find them. Consider the Santa Ana, Calif. community who the Orange Country Register reports is finding even houses being readied for demolition have attracted unwanted residents — both human and animal.