CLEVELAND, Ohio — The “shadow inventory” of homes that someday will likely become foreclosed on means an uncertain future for some of Cleveland’s inner-city and inner-ring suburban neighborhoods already decimated by the subprime mortgage boom and bust, housing experts say.
The blight and decay created by houses stripped of value by foreclosure and vandals has caused housing prices in these neighborhoods to plummet, leaving those who remain and have mortgages typically owing far more than what their homes are worth.
Housing experts gathered at Cleveland State University’s Maxine Goodman Levin College of Urban Affairs on Friday to discuss the foreclosure phenomenon and its current effect on Cuyahoga County, Ohio and the rest of the country.
The number of foreclosures in Cleveland and Cuyahoga County peaked in 2007. Filings were down 23 percent countywide in 2011 compared to 2007 and 45 percent in Cleveland over that time period.
But based on the number of filings through May of this year, both the city and county could see an uptick in filings in 2012, especially on Cleveland’s East Side, which is considered by some as the epicenter for the national foreclosure crisis.
The shadow inventory are homes where the owners are at least 60 days late on mortgages. Frank Ford of Neighborhood Progress Inc., a speaker at the forum, said he was optimistic that the hardest hit neighborhoods, under the right set of circumstances, could bounce back some day. Yet he acknowledged that the unknown quantity represented by the shadow inventory is troubling.
“That’s the wild card,” Ford said. “If the shadow inventory hits us, it could be another wave of the tsunami.”
There are approximately 27,000 vacant homes in Cuyahoga County. An estimated 16,000 of those properties are in Cleveland, primarily in East Side neighborhoods.
Paul Bellamy, director of development and research at Empowering and Strengthening Ohio’s People, which helps homeowners facing foreclosure, said there are too many properties available in the city and county but not nearly enough prospective buyers or buyers who are eligible for mortgage loans in a tight credit market.
The long delays by banks in filing foreclosures against homeowners with delinquent mortgages adds uncertainty to the future of badly hit neighborhoods and when — or if — housing values will rebound.
The delays also make it more difficult for homeowners to work out an agreement to keep their property when they haven’t made a mortgage payment for two years, said Bellamy, another speaker at the forum.
Ford said there are reasons for optimism. The city of Cleveland has taken some positive steps in the last year, including passing an ordinance that makes it harder for property owners to sell and then shirk responsibility for blighted properties.
Other reasons for hope, he said, are the Cuyahoga County land bank, which has taken a lead role in demolishing houses; Cleveland Housing Court Judge Raymond Pianka’s aggressive steps in holding property owners accountable; and the wealth of researchers at Cleveland State and Case Western Reserve universities.
“I think it’s what separates Cleveland from other cities in the country that have as bad a problem as Cleveland,” Ford said.