While job loss is a top reason for foreclosures, official unemployment rates by state from the Bureau of Labor Statistics don’t correlate highly with the foreclosure rates currently. Since current official employment rates are so high in the United States, it is reasonable to assume that underemployment is a greater cause of foreclosures than full unemployment is in this specific economy.
The labor market has gone through massive changes during the pandemic, and one of those is people leaving the labor market voluntarily or working on a casual or part-time basis by choice. People choosing not to look for jobs or to be underemployed are at higher risk of foreclosure than are fully employed people, and they are also not reflected in unemployment figures.
Another labor-related cause of foreclosures that isn’t reflected in unemployment numbers is the effect that holding back the minimum wage artificially has had on the labor market and on home-buying behavior.
Without cost-of-living (COL) increases in the minimum wage and the corresponding COL increases in higher-waged jobs, buyers are less likely to have a down payment saved before buying a house, so they are more likely to enter into larger and riskier mortgage contracts at higher interest rates. This increases the precarity of the market and the mortgage default rate, which leads to foreclosures.
Based on data from ATTOM, these are the 10 states with the highest rates of foreclosures from the first three months of 2022.
Going through a foreclosure can be devastating, and many communities still haven’t recovered emotionally or financially from the years of unusually high numbers of foreclosures following the financial crash of 2008.
