Mortgage Woes to Sink Property Values

AP reports:

An expected surge in home foreclosures will cause U.S. property values to sink by $223 billion, with the most severe impact in minority communities, a new report says.

The report released Tuesday by the Center for Responsible Lending estimates that roughly one in three households will see their property values drop by $5,000 on average as mortgages made to borrowers with weak credit in 2005 and 2006 reset at higher interest rates, accelerating the pace of foreclosures.

Property values and tax revenues will decline most sharply, the center said, in neighborhoods with lots of minority residents, who received a disproportionate share of such mortgages. The report's authors asserted that foreclosures have a negative effect on surrounding properties, raising the risk of fire and vandalism.

"These foreclosures are wiping out wealth that people often took a lifetime to build," said Martin Eakes, the center's chief executive. "Many families will never achieve homeownership again"