By many measures, the housing market has been flexing its recovery muscles. Since November, U.S. home prices have been topping pre-crisis peaks. Flipping activity recently hit a 10-year high. Construction starts nationwide have been exceeding expectations, and homeowners are refinancing like they haven’t been in years.
So when reports surfaced last month that U.S. foreclosure activity hit an 11-year low, that should have been another sign — right?
Like most things in real estate, it depends on location.
Though foreclosure activity dropped 16 percent nationwide in February, to its lowest level since November 2005 — before the housing bubble burst — the Philadelphia metro area did not fare nearly as well. Its troubles driven largely by New Jersey, the 11-county region ranked sixth-worst in the nation when it came to foreclosure-activity volume, with one in every 667 homes experiencing some kind of activity in February, according to Attom Data Solutions, a real estate data company. That rate was nearly consistent from the year before, but up 8.6 percent from January.
(Attom defines the region as Philadelphia, Bucks, Chester, Montgomery and Delaware Counties in Pennsylvania; Salem, Gloucester, Camden and Burlington Counties in New Jersey; Cecil County, Md.; and New Castle County, Del. In its analysis, foreclosure activity includes everything from the initial notice of default to notice of an auction to a lender repossession.)
Ranking the worst in the nation, Attom found, was the Atlantic City-Hammonton metro area, with activity skyrocketing 65 percent in February, so that one in every 301 homes experienced foreclosure proceedings. By contrast, just one in every 1,625 homes nationwide experienced the same.
Statewide numbers were not much better. New Jersey ranked the worst when it came to foreclosures, with activity jumping 16 percent year over year. Pennsylvania had the 10th-highest foreclosure rate, though activity declined 11.8 percent.
Attom's findings, released in March, signify that many communities have begun to put the crisis behind them. February marked the 17th consecutive month foreclosure activity decreased across the United States on a year-over-year basis, Attom found, with more declines expected.
“We’ve been heading in this direction,” said Daren Blomquist, senior vice president at Attom. “And there are two factors for it: There is less legacy distress that banks are dealing with … and more loans originated in the last seven years that have been robustly underwritten and are now performing very well.”
Yet the disparity between certain metro areas and the nation also underscores how the housing recovery remains uneven. While states and metro areas in the Midwest had the least foreclosure activity in February (Sioux Falls, S.D., did the best), historically poorer Northeastern areas and Southern states saw the most.
“Areas like South Dakota were not really part of the inflated housing bubble, so they don’t have legacy distress there,” said Blomquist. “Other places like Boulder [Colo., ranked third-best], while they had a housing bubble, they bounced back more quickly because of strong economic fundamentals."
Those fundamentals remain more anemic here. In Salem, Gloucester, and Camden Counties — which ranked the worst for foreclosure activity in this region — the percentage of people in poverty hovered at 7.7 percent, 11.9 percent, and 13.1 percent in 2015. Meanwhile, as the U.S. saw household income increase 3.7 percent in 2015, New Jersey's growth was minimal at 0.4 percent.
Yet the bigger problem, observers say, is New Jersey's foreclosure process. As a judicial foreclosure state, all matters must go through the courts, which can lengthen the process. The Garden State takes longer than most: an average of 1,383 days in 2016's fourth quarter, Attom found, the country's second worst timing.
Observers say that's partially the result of the 2010 moratorium issued against six large banks amid complaints they used robo-signing to complete legal documents. During the moratorium, which was lifted in August 2011, foreclosures dropped off significantly.
"There are a very large number of open files that banks have sat on for a long time," said New Jersey-based foreclosure defense attorney Josh Denbeaux. "Market conditions change and so do accounting practices, and they often move a whole lot of units at the same time."