Arizona Foreclosures Contribute to Slow Economic Recovery

by Simon Lindsay on Foreclosure Crisis

Arizona foreclosures have been contributing significantly to slow economic recovery for the state, according to state legislators, officials and economists.

According to Richard Stavneak, legislative budget director for the state, the state budget has already suffered deep cuts, but state finances are still troubled because of sharply reduced tax revenues from sales and real estate properties.

Stavneak also cited continued residential foreclosures as among the biggest factors blocking recovery. Foreclosures dragged down steeply the values of properties, which are among the major sources of revenues for the state.

Although the number of bank foreclosures houses statewide dropped in February, the number was still significant, making Arizona still second among all U.S. states in foreclosure rate. A total of 6,053 homes were repossessed by banks statewide in February, down from the 8,637 units taken back by lenders in January.

In January, bank owned units comprised more than 41 percent of the 21,048 residential units that became distressed while bank owned homes accounted for 36.21 percent of the 16,718 housing units put into the foreclosure process in February.

While the pace of Arizona foreclosures rose by 4.5 percent in January, the pace in February slowed down by almost 21 percent.

Despite the slowdown in February, economists still expect a slow recovery for Arizona largely because of its weak tax collections. According to Stavneak, the state could face a budget deficit of $150 million for the current fiscal year that ends in June.

Despite expected reductions in tax collections, state officials still approved the $8.5 billion state budget for the following fiscal year, based on an expected increase of 4.2 percent in state revenue. However, Stavneak and economists insisted that the budget was based on an expected revenue gain of 3.4 percent. They explained that they used two computer models developed by the University of Arizona.

Opposition politicians, however, are more pessimistic about the state budget. They said that based on current economic conditions and on the pace of tax collections, state revenue will not improve as current state officials expected.

In January, Arizona was among the foreclosure-battered states which did not slow down in foreclosure activity. Others like California, Florida and Michigan slowed down. Perennial top-placer Nevada even posted a lower rate of increase in pace of foreclosure activity.

Nevertheless, the inclusion of Arizona foreclosures among the targets of the $1.5 billion federal assistance recently distributed by the Obama administration is expected to help Arizona in its recovery efforts.

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