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The nation’s double-digit home price appreciation, which has pushed homeowner’s equity to record highs, isn’t necessarily good news for all homeowners. A new analysis released today by Knock, the fast-growing digital homeownership platform that brings certainty and convenience to buying and selling homes, finds that while the nation’s recent home price growth is the shot in the arm for homeowners struggling with underwater mortgages since the Great Recession, for others the Covid-induced housing boom is resulting in higher tax burdens they can’t afford.
As a result, real estate-owned foreclosures have increased in states like Virginia, Georgia and New York throughout 2021, while they’ve fallen in New Jersey, Mississippi, Delaware, Connecticut and New Mexico — a trend that will likely continue now that the government’s forbearance program has ended.
The analysis — which examined the impact of home price appreciation, unemployment rates, debt-to-income ratios, income inequality and the length of the foreclosure process on real estate-owned transactions — found that those homeowners already struggling to make their mortgage payments are at the greatest risk of losing their home to foreclosure as property taxes rise.
“Home price appreciation has become a double-edged sword,” said Knock Co-Founder and CEO Sean Black. “Until recently, lack of home price appreciation has been attributed to underwater mortgages and high foreclosure rates, but in 2021 upticks in foreclosures are more a result of rising home values pushing at-risk homeowners over the edge with increased tax burden. Going forward, property tax increases may exacerbate foreclosure rates in states where unemployment, income inequality and debt-to-income ratios are prevalent.”
The impact of home price appreciation and property taxes on foreclosures
In 2021, homeowners in Virginia, Georgia and New York — the states with the largest increases in foreclosures — saw their property values appreciate between 18-21%, while property taxes increased 9%,14% and 21% on average, respectively. Because property tax assessments utilize recent home sale values as the basis of their assessments, many homeowners are seeing their tax bills skyrocket due to the increase in market values.
During this same period, the states that have historically topped the foreclosure rankings saw their home values return to their pre-Great Recession peaks, after only beginning to grow in line with the national average in 2019. From 2019 to 2021, home prices appreciated on average year-over-year 22% in Connecticut, 20% in New Jersey, 19% in Delaware and New Mexico and 14% in Mississippi, nearly 15 to 20 times the growth averages accumulated in the prior decade.
Over the 10-year period from 2009-2019, home prices in Connecticut were still 11% below their peak price in 2008, while Delaware remained down 6%. During this same time period, home appreciation in New Mexico (11%), New Jersey (10%) and Mississippi (8%) grew slower than the national average of 23%.
|
2021 Top Foreclosure States (January to September 2021) |
|||||||
|
Rank |
State |
Real estate- owned transactions |
Average House Price Index % change YOY |
Average unemployment rate |
Debt-to- income ratio |
Income inequality* |
Average length of foreclosure process (days) |
|
1 |
Virginia |
3% |
18% |
4.6% |
1.82 |
0.47 |
393 |
|
2 |
Georgia |
2% |
21% |
4.1% |
1.46 |
0.48 |
442 |
|
3 |
New Jersey |
2% |
20% |
7.4% |
1.46 |
0.48 |
841 |
|
4 |
Mississippi |
2% |
14% |
6.1% |
1.56 |
0.48 |
133 |
|
5 |
New York |
2% |
19% |
8.0% |
0.74 |
0.51 |
885 |
|
National |
1% |
20% |
5.6% |
1.50 |
0.46 |
614 |
|
*Gini coefficient
|
2019 Top Foreclosure States |
|||||||
|
Rank |
State |
Real estate- owned transactions |
Average House Price Index % change YOY* |
Average unemployment rate* |
Debt-to- income ratio* |
Income inequality* |
Average length of foreclosure process (days) |
|
1 |
New Jersey |
10% |
0% |
6.8% |
1.73 |
0.48 |
841 |
|
2 |
Mississippi |
7% |
1% |
7.4% |
1.47 |
0.49 |
133 |
|
3 |
Delaware |
7% |
0% |
5.8% |
1.66 |
0.45 |
321 |
|
4 |
Connecticut |
7% |
0% |
6.5% |
1.56 |
0.50 |
854 |
|
5 |
New Mexico |
6% |
1% |
6.5% |
1.71 |
0.48 |
701 |
|
National |
2% |
2% |
6.4% |
1.51 |
0.48 |
614 |
|
About Knock
Knock makes home buying simple and certain by transforming all buyers into cash buyers and giving them complete control of the process from their phone. Knock’s flagship Home Swap™ product empowers consumers with a cash-like offer to buy the home they want before selling the home they have, providing the convenience of not having to live through repairs or showings in the process. Knock GO™ (Guaranteed Offer) is a cash-backed home loan solution for first-time homebuyers looking to compete in today’s hot housing market.
Launched in 2015 by founding team members of Trulia.com, Knock has raised more than $600 million in debt and equity from top-tier investors, including RRE Ventures, Foundry Group, Redpoint, Greycroft, Corazon Capital, Correlation Ventures, Great Oaks Venture Capital and FJ Labs. The National Association of Realtors®, through its investment arm Second Century Ventures, is a strategic investor in Knock, giving its 1.5 million members the ability to market Knock’s homeownership solutions to their clients. Knock currently operates in 69 markets nationwide and plans to be in over 100 markets by 2023.
Contact: pr@knock.com
