CLEVELAND, Ohio — Foreclosed homes in Cuyahoga County are more likely to remain vacant up to five years after they’re sold compared with homes sold by traditional means, a new study by the Federal Reserve Bank of Cleveland has found.
Fed researcher Stephan Whitaker examined sales records and U.S. Postal Service vacancy rates from 2006 through 2010. He noted that the nationwide foreclosure crisis has hit Cuyahoga hard.
In one key finding, he looked at homes that were sold or foreclosed on in January 2006 and whether they were vacant in December 2010. His calculations involved 85,000 properties and 130,000 sales.
“The data reveal that foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure,” Whitaker wrote. Some homes suffered “long-lasting scars.” Among foreclosed homes, 22 percent are vacant five years after their last sale, compared with 10 percent of homes sold not through foreclosure, the study found.
“Those empty houses are more than just a statistic,” said Mark Seifert, executive director of Empowering and Strengthening Ohio’s People, a non-profit Cleveland organization in Cleveland that helps homeowners. “They often become havens for illegal activity; attract crime and trash; and diminish the quality of life for everyone who lives around them.”
The Fed study noted that foreclosures – and the vacancy rates that follow – have many negative effects:
• Foreclosures add to the supply of homes for sale and bring down prices of existing homes for sale.
• Lower values can hurt people who aren’t selling their homes, particularly if they’re trying to leverage their home equity for home improvement loans, business loans, college tuition or retirement.
• People whose homes have lost value may tighten their spending to try to make up for lost wealth and “this can act as a drag on economic growth.”
• Vacant homes are less likely to be well-maintained, and this hurts the appeal of the entire neighborhood and brings down what other sellers can get for their homes. One nationwide study said a distressed property within 300 feet of a home for sale will bring down the price by 1 percent.
• In high-crime areas, vacant homes are often broken into, vandalized, stripped of metal and occupied by criminals.
“This study,” Seifert said, “should be a reminder that foreclosures affect more than just the family that loses its home. Foreclosures hurt the entire community.”
Lou Tisler, executive director of the non-profit Neighborhood Housing Services of Greater Cleveland, said the study is sobering.
“For those that believe the worst is over, they only need to try to sell their home to come to the conclusion that there are certainly current, and after, effects of the foreclosure crisis, which this study shows.
“The study shows that it is not just the homeowner, or the bank but also the community that endures long-term financial hardship when a home, or numerous homes are foreclosed upon,” Tisler said. “This has been one of the reasons that we have seen communities and others look for innovative solutions to this crisis. Everyone has a vested interest in the turnaround of our housing markets.”
The Fed said policymakers should work toward keeping homes out of foreclosure and, for homes that do go into foreclosure, try to offer incentives or change administrative procedures to reduce the time the property is vacant.