Distressed Properties Listings Behind Financial Problem of Michigan

by Donald Hanz on States

Most of the towns and cities of Michigan are facing potential financial crisis as revenues from tax collections declined by 20% in 2010. The decline is reportedly the worst experienced by the state since 1994. The problem with tax collections has been attributed by economists to the continuous growth of distressed properties listings and the high level of unemployment.

The high number of foreclosed properties, including Southfield foreclosures for sale, has caused values of residential real estate to drop significantly in most areas of the state. Along with the high unemployment rate, the housing problem hit the state's tax coffers hard, leading to municipal financial troubles in most towns and metro areas.

Already faced with the huge problem of Michigan foreclosure homes, the state also needs to decide by March 2011 whether its communities will borrow the necessary amount to pay their bills or whether they will risk defaulting on bonds. Municipalities of Michigan rely on real property taxes for almost 60% of their revenues. The cities and counties were also hit hard by cuts in state financial support which usually covers up to 35% of local budgets.

Huge supplies of distressed properties listings and foreclosures in the state contributed to the decline of taxable housing values in most counties, analysts have stated. In Oakland County, taxable home values dropped by around 12%, with further declines predicted until 2012. This, along with other economic troubles, puts into question the ability of municipalities to secure loans from banks to pay their way out of the financial crunch, economists have added.

Sale of bank home foreclosures has stuttered in the state as more distressed properties enter the market. In October, Michigan ranked third nationwide in terms of foreclosure filing totals. In addition, unemployment rate was at 12.8% in October, further depressing the area's economy. With unemployment at almost record highs, more people defaulted on their mortgages, causing foreclosures to rise further.

Latest housing data showed that as of October, one household out of 235 is under some form of foreclosure in Michigan. This includes properties under distressed properties listings, households with notices of default, repossessed houses and those scheduled for a foreclosure auction. The number is 17% higher than October 2009.

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