The Baton Rouge metro area saw a 43% uptick in foreclosure starts last year, the largest spike recorded among the nation’s largest metro areas, according to data released last week.
Local mortgage dealers say the rise in foreclosure starts is a reflection of job losses and a struggling local economy. It’s yet to be seen whether 2019 will be an anomaly or the start of a bad trend.
“Probably the most significant impact on foreclosures in 2019 rested with the decision for Georgia Pacific to close down its plant,” Tee Brown, president and CEO of GMFS Mortgage, says. “For the Baton Rouge area, that is really a significant employer that walked out.”
The company laid off roughly 650 workers at the East Baton Rouge Parish plant, plus another 40 scattered business positions when the plant officially closed in March.
Last week’s reports show Baton Rouge was one of five metros with populations near 1 million that saw a double-digit percent increase in foreclosure starts from last year, reporting a 43% spike in lenders starting the foreclosure process. The second-highest spike was in Atlanta at 25%; followed by Salt Lake City, (17%); Orlando, Florida (16%); and Portland, Oregon (16%).
As a whole, Louisiana was among 14 states seeing a year-over-year increase in foreclosure starts at 11%, trailing Rhode Island (54%); Mississippi (39%); Georgia (24%); and Arkansas (14%).
Despite the spike, Brown says he expects last year to be an anomaly in the local housing market, citing a downward trend in the number of foreclosure starts filed in the fourth quarter.
“Rates are still really great, our economy here is expected to continue growing, the industurial sector is doing well. Going forward, I don’t see a trend of foreclosures,” he says.
Assurance Financial CEO Kenny Hodges isn’t so sure it’ll bounce back that quickly.
“Our delinquency, and our housing in general, is going to go as jobs go. That’s always going to be the case,” Hodges says.
The 2019 foreclosure trend in Baton Rouge is the byproduct of increasing unemployment rates, Hodges says.
According to the latest unemployment reports released earlier this month, non-seasonally adjusted unemployment in Baton Rouge was 4.4%, up from 3.8% in the same month in 2018 and more than a percentage point higher than the national rate of 3.3%.
Hodges also points to the declining national rate of delinquency—the opposite of what’s happening locally—as proof that it’s Louisiana’s economy that’s the problem. As of December, the national delinquency rate decreased by 3.7% compared to the previous month, and 12% compared to the previous year.
Zillow, one of the biggest online real estate websites, listed nearly 560 homes under foreclosure or pre-foreclosure in East Baton Rouge Parish this week. Twenty-five of those are in full foreclosure, while the remaining fall under pre-foreclosure, which includes properties with scheduled foreclosure auctions. All of the listings are fairly evenly scattered throughout the parish, according to Zillow’s mapping data.
In cases where homeowners have high debt-to-income ratios, low savings, or made low down payments through federal programs like the FHA or rural development program, when that first roadblock hits, like a job loss, mortgage payments are one of the first things to go, Hodges says.
Certainly, when homeowners lose their jobs or have an unexpected loss of income, there tends to be an overextension on mortgages, Brown says, but he doesn’t see a major red flag.