In this episode, Scott Carson takes on the top 50 markets that are facing trouble and showing the most amount of stress. He breaks them down based on days on market, price reductions, foreclosure ratios, and homeowners who are underwater. While these may be considered ugly markets, they can be profitable and there are actually opportunities on them, like being able to buy stuff at significant discounts.
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The Top 50 Markets Turning Ugly (Part 2, 25-1)
This is a second part to what we did before, a website showed The Top 50 Markets That Are Turning Ugly. We did the first half of that list, 50 through 26. This will be the top 25 markets that are starting to get ugly. It was a great article. It shared the default dates, the number of foreclosures, market drops in price and things like that. You may be thinking, “Why the heck Scott would invest in a market that’s facing stress?” It makes sense because the more defaulted notes, the bigger discounts especially when there’s more inventory there. There are opportunities. You’re able to buy stuff at significant discounts and either modify the loan or foreclose. Take the property back or do one of the ten different extra strategies that we educate and teach on. It can often be a profitable market.
We’ve been investing in quite a few of these markets for a while. There are quite a few on the lower half of the top 50. We’ve owned assets, made a lot of money and done well in and there are quite a few of these markets that we’ve been investing in. I think you want to grab a pen and paper and take some notes on these markets and identify them to tweak where you’re looking for assets. This is the top half of the top 50 markets that are starting to get ugly out there. Let’s dive into this and get ready.
This is the top 50 defaulted markets, market number 25 through number one. Number 25 is another market in Ohio, specifically Dayton. This is so far the lowest priced market that we’ve seen. The median list price in Dayton Ohio is $67,000. The two-year price change is a 16.5% change. The percentage of underwater mortgages is 27.6%. One in every four homes is underwater still. There’s a foreclosure for one in every 1,820 homes. The big increase in home prices in Dayton over the past years might signal to some at the real estate market in Southwestern Ohio City doing fine. However, Dayton has the second-highest percentage of underwater mortgages among the cities in this list. The foreclosure rate is higher than the national rate. While the values have increased, you still have a lot of opportunities there in Dayton with defaulted mortgages. One in four is underwater, which I consider in default for the most part.
Lehigh Acres, Florida
Number 24 is an area that we have bought a lot of assets in. This is Lehigh Acres, Florida. If you don’t know where Lehigh Acres is, it’s near Fort Myers. It’s a little inland and stuff compared to Cape Coral and Fort Myers. We’ve made a lot of money in Lehigh Acres. The median list price is $180,000. It’s down quite a bit, about $60,000 from those who are a little bit closer to the water. The two-year price change is only 6.5%. Just under 7% of the homes are underwater. There’s a foreclosure, one in roughly every 1,200 homes. Although the percentage of underwater mortgages in Lehigh Acres is lower than the average percentage rate, the foreclosure rate is higher here than the US average.
In addition, this city in the Fort Myers metro area on Florida’s Gulf Coast has seen a slowdown in home prices. 20% of the home is listed for sale here have had price cuts. One out of five has dropped the price. We still are looking at this area because we’re still finding some stuff that’s underwater. Our good realtors there have believed that the market is topped out already and started to come down. Many of the investors I know in that neck of the woods have taken the properties back or have rental properties. There are already those that converted have been selling everything to take avenge to that market. They hold in on that cash so when the market does hits south again, they have the cash to be in there and buy up and ride their way back up again.
Rockford, Illinois is number 23. The median list price is right at $100,000. The Rockford Peaches, maybe you’ve heard of this from A League of Their Own. The two-year price change is 10.5%. The percentage of underwater mortgages is 21%, one out of every five mortgages is underwater. There’s a foreclosure for one in every 890 homes. Rockford’s real estate market can turn ugly because a significant percentage of homeowners here have negative equity. More than 20% of mortgages are underwater in this northern Illinois city compared with about 8% nationally. Plus, the foreclosure rate in Rockford is one of the highest amongst cities on this list. This is not in Cook County, which is great but you’re still going to have roughly a nine to twelve-month foreclosure time frame in Illinois. That’s another thing to keep in mind. Although the foreclosure rates are already high, it could get a little bit higher pretty fast.
Next is Mobile, Alabama. The median list price, $160,000. Two-year price change of 6.3%. 16% of the homes are underwater. There’s a foreclosure in one in every 2,149 homes. Home prices are still rising in this port city on the Gulf Coast, but not as fast as prices are increasing across the US. The bigger problem for Mobile’s real estate market is homeowners with negative equity. The percentage underwater market here is twice the national average. That’s something to think about. You would think that with ten years since the big downturn and markets rebounding, they would’ve have recovered. They still have not recovered yet. That’s the thing to keep in mind if you’re covering other areas. On the previous list, we have Tuscaloosa. The University of Alabama which is booming and stuff like that, is still in the top 50.
Cape Coral, Florida
Here’s the list close to number 24, Cape Coral, Florida. The median list price is $262,000. The two-year price change is 4.2%. Only 5.5% of the homes in Cape Coral are underwater. There’s foreclosure for basically one in every 1,200 homes. The city near Fort Myers has seen rapid growth but its current housing market is experiencing a slowdown. Home prices increase just 0.1% on average. Only 22% of homes listed for sale have price cuts. Houses in Cape Coral stay on the market an average of 103 days compared with the national average of 66 days. I love Cape Coral, but I would not be buying there because it’s going to take a dive. Some opportunity is going to be coming soon. That area, Fort Myers, Cape Coral and Lehigh Acres has had a lot of growth and one of the fastest-growing areas in the country. People are moving south and living on the coast there.
Fort Pierce, Florida
The next one is Fort Pierce, Florida, on the opposite side. The median list price is under $200,000. The two-year price change is 0.5%. The underwater mortgage is 9.7%. There’s a foreclosure for one in every 1,585 homes. While home prices climbed more than 9% nationwide, they barely budged in this small city in Florida’s Atlantic Coast. Nearly 10% of the mortgages are underwater in Fort Pierce compared with about 8% nationwide. The foreclosure rate is higher than the rate across the US. There are some great areas there but there are also some rough areas. You’ve got to be careful. I’d be willing to bet all the underwater mortgages are in some of the rougher areas. There are some opportunities there like in every city. It’s going to have its good and bad spots.
Next is Suffolk, Virginia. We’re moving north of the Atlantic Coast. The median list price is $283,000. 0% change in the past years, 14.8% underwater mortgages. There’s a foreclosure for one in every 1,846 homes. Home prices haven’t risen any on average in Suffolk. Homes for sale stay on the market on average of 76 days compared with the national average of 66 days. The other problems the real estate market is facing in this city, which is part of the Virginia Beach Metro area are the relatively high percentages of underwater mortgages and high foreclosure rates. Things are moving like the national average 66 days there, but you still have underwater mortgages and higher foreclosure rate. You’re seeing an increase in short sales in Suffolk, Virginia. If you don’t know what Suffolk is, there’s a big base there. The Navy has got a big shipyard there in Suffolk. Essentially far from Virginia Beach as well.
Number eighteen is Laurel, Maryland. The median list price is $350,000. The two-year price change down 2.8%. The percentage of underwater mortgages is 12.6%, almost double than the national average. There’s a foreclosure for one in every 1,457 homes. Home prices have been falling in the city that is located between Baltimore and Washington, DC on top of that. 13% of mortgages are underwater in Laurel compared to about 8% nationwide. The foreclosure rate is higher than the US average. Between Baltimore and Washington, this is where Laurel is. It’s a great area but unfortunately, you’ve got some issues there. Changes have been down. You’re going to have some influx as people come and go with the government or as with the elections. If you’re looking to move to that neck in the woods, you might want to check out Laurel. If you’re buying something, hold on to it for a while.
Next is Joliet, Illinois, another Illinois city. The median list price is $170,000. The two-year price change is about 10%. They’ve got 15.5% of the homes are underwater. There’s a foreclosure for one in every 812 homes. Although home prices in Joliet increase by 9.6%, prices haven’t risen any on average. What’s more troubling though are the higher number of foreclosures and underwater mortgages in the city. Thirty miles southwest of Chicago, Joliet has the fourth-highest foreclosure amongst cities on this list. The percentage of underwater mortgages here is almost double the percentage nationwide.
Number sixteen is Valdosta, Georgia. The median list price is %155,000 with 0% price change. The percentage of underwater homes is 22.7%. There’s a foreclosure for one in every 3,300 homes. The foreclosure rate in this city near the Georgia-Florida borders is lower than the US average. However, Valdosta has one of the highest percentages of underwater mortgages among cities on this list. Home prices here also fall more than 6%. Think about that, prices are falling and underwater mortgages are increasing. If you’re looking for something on Florida-Georgia borderline, this might be the place for you. A lot of people are buying in Georgia because of the fast foreclosures. They moved over to buying in Florida because they’re better deals because of the longer foreclosure time frames. If you’re buying debt in Georgia, one of the things you have to keep in mind is they want you to be a licensed mortgage broker in that state to be able to buy. They’ll exclude that if you’re using your self-directed IRA to fund the purchase.
The top fifteen takes us back up to Illinois, Decatur. The median list price is $100,000. The two-year price change is 8.5%. They’ve got a 20.4% rate of homes that are underwater. There’s a foreclosure, one in every 5,800 homes. Decatur has the lowest foreclosure rate among the cities on this list. The housing market in this central Illinois city may turn ugly due to its high percentage of underwater mortgages. Decatur also has a higher percentage of homes with price cuts than half of the cities on the list. Homes for sale spend more days on the market here than in a majority of cities. It may stay on the list but I’m willing to bet you see a lot of short sales in Decatur because of the longer foreclosure time frame in Illinois. There’s not much stuff going on there. Keep that in mind, Central Illinois, Decatur, Illinois.
It takes us to number fourteen which is Elgin, Illinois. The median list price is $240,000 compared to the previous one. The two-year price change is 7.8%. The percentage of underwater mortgages is 11.9%. There’s a foreclosure for one in every 1,223 homes. If you don’t know where Elgin is, it’s a Chicago suburb. It’s twice the national rate when it comes to foreclosures. The home price growth in Elgin has slowed. Nearly 20% of the homes listed for sale have had price cuts. I would buy in Elgin what I would not buy in Chicago. I don’t want to buy in Cook County. Elgin is in Lake County or outside of Cook County.
Thirteen is Riverview, Florida. The median list price in Riverview is $253,000. The two-year price change is 2.2%. Only 7.2% of the homes are underwater but there’s a foreclosure for one in every 800 homes. This is in the Tampa area. Like other markets near Tampa, it has a housing market that could turn ugly. It has the second-highest foreclosure rate on the list. Price growth has slowed, nearly 25% of homes listed for sale at price cuts compared to a 17.5% nationwide. Tampa and Miami were the first two to recover after the downturn. They bloomed and a lot of investors came in there, but it’s the big sign. Price cuts mean the market’s dropping. The values are dropping. You have people that are still buying there like crazy. They’re overpaying for it. They need to cash out and sit looking for cash. Wait for the market to either dropdown and buy stuff that is default.
That takes us back across the border to the big market in Georgia. Atlanta, number twelve. The median list price is $340,000. The two-year price change is 1.6%. 8.8% of the homes are underwater. There’s a foreclosure in one in every 1,950 homes. Home prices in Atlanta have dropped 3% in Georgia’s capital and largest city. Atlanta is also seeing home stay on the market longer than the US average, plus the foreclosure rate is higher than the rate nationwide. Georgia, as I said has faster foreclosure markets. It’s a non-judicial state but you’ve got some strict laws there as far as licensing required by the Attorney General. You can get away with it by partnering up with a mortgage broker who’s doing stuff there or using your IRA to fund the deal.
Number eleven is Lawton, Oklahoma. The median list price is $100,000. The two-year price change is 5%. The percentage of underwater mortgages is 25.7%. There’s a foreclosure in one of every 1,700 homes. Lawton is the fourth highest percentage of underwater mortgages amongst cities on this list. The foreclosure rate also is higher in the southwestern Oklahoma City than it is nationwide. The homes stay on the market for an average of 117 days. That’s pretty much double than the US national average of 66 days. It’s not too far from Oklahoma City.
Number ten is Hampton, VA. The median list price is $180,000. The two-year price change is just under 5%. 19.9% of the homes are underwater and there’s a foreclosure in one every 2,150 homes. Hampton is one of the fastest-growing cities in the Hampton Roads regions of the Chesapeake Bay. However, its housing market has been slowing. Home prices are falling by nearly 3% on average. The percentage of underwater mortgages here double the percentage nationwide. If they’re looking for something that’s underwater, this might be an affordable area. Virginia has a relatively fast foreclosure rate too. It’s something to keep in mind there. There’s some opportunity there for you.
That brings us to number nine which Aurora, Illinois. The median list price is $220,000. The two-year price change is 4.7%. The percentage of underwater mortgages is 11.8%. There’s a foreclosure of one in every 1,500 homes. The Chicago suburb is the second-largest city in Illinois. Its housing market is showing signs of trouble. It has the fourth-highest percentage of homes with price cuts at 23.7%. The foreclosure rate in the percentage of underwater mortgages is higher than the US average. If you’re living in Illinois, you may want to look at Aurora there. There’s an opportunity to pick up stuff if you don’t mind the foreclosure process.
Moving on to Bridgeport, Connecticut. The median list price is $190,000. The two-year price change is 11.1%. The percentage of underwater mortgages is 26.9%. There’s a foreclosure in one in every 1,453 homes. This port city 60 miles from New York has the second-highest percentage of underwater mortgages on this list. The foreclosure rate is higher than the national rate. Houses stay on the market an average of 102 days compared with the US average of 66 days.
Number seven is Norfolk VA. Back to Virginia. The median list price is $220,000. The two-year price change is 3.3%. 20.6% of the homes are underwater. There’s a foreclosure for one in every 2,100 homes. This is where the world’s largest Naval base is. Norfolk is located in southeastern Virginia on the Chesapeake Bay. Home prices have been flat. Houses are staying on the market here is slightly longer than the national average. The bigger problem in Norfolk though is the high percentage of underwater mortgages, which is more than double the percentage nationwide. Anytime you have a base, you’re going to have an influx in and an influx out. People are buying homes and people are moving out for long-term stuff on orders. We see that in Central Texas, especially with Fort Hood, North of Austin. We see that when the market changes a little bit there. That’s an opportunity here for those to come in and maybe do some good with some of the military out there.
Miami Beach, Florida
Six is one of my favorite places, Miami Beach. The median list price is right at $500,000. The two-year price change is down to 5%. The percentage of underwater mortgages is 14.5%. There’s a foreclosure in one in every 400 homes. Home prices have been rising on average across the US. They fall in 5% in this resort city across the Biscayne Bridge from Miami. Houses for sale spend more days in the market here, for 225 days, than in any other cities on the list. Eight months in Miami Beach. I was picking up condos and things in Miami Beach. They are very cheap. It’s 5% to 10% of the unpaid balance. We’re starting to see those higher-end condos. Million-dollar condos are what’s killing Miami Beach because those things are sitting around with a lot of growth and redevelopment in the neck of the woods. Miami Beach is going up a little bit and Sunny Isles Beach too along the Highway 1. If you like Miami, there’s an opportunity there with defaults. You probably have to hold it for a while because Florida still has a pretty decent, six to nine-month foreclosure time frames. There are a lot of condos so that could work in your favor if you’re buying and foreclosing, avoiding all the HOA fees, condo association fees.
Number five is Baltimore, Maryland. I didn’t know Baltimore would be so high when I thought about this list. I thought it would be on the top 50 but not number five. The median list price is $170,000. The two-year price change is 17%. 26.5% of underwater mortgages. The foreclosure is one in every 1,400 homes. This is Maryland’s largest city. It has had the biggest percentage increase in median home list prices of any city on the list. Baltimore saw a 0.6% drop in home prices. It has a higher percentage of homes with price cuts than most cities. Baltimore has the third-highest percentage of underwater mortgages in this study. Baltimore has some gray areas and some rough areas. There are areas that years ago were just trashed that got re-gentrified and built up nicely. You still have hectares and a ton of homes that went to tax foreclosure. They’re starting to re-gentrify, rebuilt up and stuff like that. Some of these are opportunities in Baltimore but you’ve got to know where to look. You’ve got to make sure you buy it right as well.
Four is Columbus, Georgia. The median list price is $115,000. The two-year price change is down 10.2%. 22.2% of the homes are underwater as far as the mortgages. There’s a foreclosure one in every 1,200 homes. Home prices in Columbus have dropped more than in all but two cities on this list. The percentage of underwater mortgages of this city on the Georgia-Alabama border is among the highest rates in the study. The foreclosure rate here is double than of the rate nationwide. Columbus is on that Georgia-Alabama borderline. It’s not too far from Auburn. You still need to have a license to buy in Georgia but there’s some opportunity there with fast foreclosure time frames. Columbus is a decently sized area. You’ve got some valuable median list home price there. It’s also not too far from Fort Benning, the Military base there.
Lakewood, New Jersey
Number two is Lakewood, New Jersey. The median list price is $252,000. The two-year price range is down 12.3%. The percentage of underwater mortgages is at 9.4%. Foreclosure is one in every 1,187 homes. This city is about 70 miles south of New York City. It has seen home prices tumble more than 12%. Second biggest drop amongst the cities in GOBankingRates Ranking. The average number of days of a home stay in the market here is 135. That’s twice the national average. The foreclosure rate is twice as high as the rate nationwide.
That brings us to number one. The number one market getting ugly out there is Peoria, Illinois. The median list home price is $125,000. The two-year price change is down almost 16%. The percentage of underwater mortgages is 21%. There’s a foreclosure for one in every 932 homes. Peoria claims the number one spot on this list, but the market is turning ugly for several reasons. This city in central Illinois has seen the biggest drop in home prices than any city on this list. The average number of days houses are on the market and the percentage of homes for sale with price cuts is higher than the national average. The percentage of underwater mortgages here is more than double the percentage nationwide, almost triple. The foreclosure rate is among the highest on this list, one of the top five foreclosure lists in there in Peoria.
You think about the states. You’ve got Florida, Georgia, Connecticut, Virginia, Illinois and Maryland. If you look at the top 50 markets, those are similar states that have the same issues. What does that mean? You probably need to make those five or six states your top focus as far as opportunities. That’s where the markets at. If you’re in an area that’s got stuff like Ohio or Michigan, great. Those two states, Ohio and Michigan, didn’t make the top 50 markets. That’s not saying there are not defaults there, just not in the top 50. A lot of people end up buying there while the markets are changing. If you want to see a crystal ball of moving forward at what market you should look at, what you’re going to possibly see is a note investor. We’ve hit it with this episode and the previous episode with the bottom half of the top 50.
Go out and make some phone calls. Check out lenders and banks that are lending in those areas. It’s an easy thing you can pull on Lane Guide or distressedpro, Brecht Palombo’s software or jump in on a county clerk website and check in to see whose filed mortgages and assignments as mortgages have been sold and originated. Also, you could reach out to a couple of realtors in those markets if one of those markets meets your fancy. Start asking them to pull short sale listings for you. See what banks are handling the short sales aspects for that. It might be an opportunity to be able to bag some great deals and a discount with ready-made buyers in place. You’ll still be able to get stuff at a pretty substantial discount with the end buyer in mind.
Keep in mind, the days on market is a huge thing when it comes to areas. It’s going to change compared on street by street or ZIP code by ZIP code level but keep that in mind. Use the numbers, use the things we discussed as a negotiating tool. Foreclosures are two times higher here based on the study. Those are the little things that you can use to negotiate in buying either one-offs or probably more a little bulk aspect when you are bulk buying in specific sources. I wish you happy hunting. Hopefully this episode has been helpful for you. Go out make something happen. We’ll hopefully see you all at the top.
- The Top 50 Markets That Are Turning Ugly
- Lane Guide