Despite rising foreclosure rates across the state and nation, Ann Arbor had one of the lowest foreclosure rates in Washtenaw County and city officials and realtors say Ann Arbor’s active student housing market may be one reason the city has avoided higher foreclosure rates.

Foreclosure rates in Michigan increased 17 percent from Oct. 2009 to Oct. 2010 and the state had the fifth highest rate of foreclosure in the country last month, according to the Detroit Free Press. Roughly one in every 235 Michigan households was in foreclosure in October. Monroe, Oakland and Livingston were among the Michigan counties that experienced the highest foreclosure rates in the state.

But in the four Ann Arbor ZIP codes available for analysis, the foreclosure rate was much lower than that of the state. In October, one in every 897 households in ZIP code 48105 was in foreclosure proceedings, followed by one in every 527 houses in ZIP code 48103 and one in every 360 houses in ZIP code 48108, according to RealtyTrac Inc.

Ann Arbor’s 48104 ZIP code, which contains the University’s central campus and a large portion of downtown, experienced the highest foreclosure rate of the four Ann Arbor ZIP codes available for analysis — with one in every 322 households in foreclosure proceedings during the month of October.

Washtenaw County Treasurer Catherine McClary said one of the principal reasons for foreclosures in Ann Arbor is that there are too many houses for the number of people living in the city.

McClary said the demand for student housing has motivated developers to build more high rises and condominiums in the city.

“(The) private sector has put up a lot of new apartments lately,” she said.

McClary said these new developments could be detrimental to Ann Arbor because the city is already crowded with housing units.

The North Quad Residential and Academic Complex opened this fall and made rooms available for roughly 460 students. McClary said the new residence hall didn’t impact foreclosure rates in the city and emphasized it is the private sector building housing for University students that is having an effect.

In 2009, two high rises — Zaragon Place on East University Avenue and 4 Eleven Lofts on East Washington Street — opened. Combined, the buildings made 590 spaces available for residents. Developers are currently constructing Zaragon Place 2 on the corner of East William and Thompson streets, which is expected to house 200 to 350 residents.

Before the housing bubble burst, McClary, who has been working with foreclosures since 1999, started noticing foreclosure trends around 2005.

McClary said that foreclosure rates in the eastern part of Washtenaw County — like in Ypsilanti — are currently the highest, but the number of tax delinquencies, or unpaid taxes, in the area was stabilizing. While delinquent taxes do not directly affect a foreclosure, McClary said they are a leading indicator of foreclosure trends.

Tax delinquencies in Ann Arbor are rising faster than those in other parts of the county. As a result, McClary said foreclosures in Ann Arbor will likely continue to increase.

Nancy Bowerbank, foreclosure and short sale manager for Charles Reinhart Company Realtors, said the number of foreclosures in Ann Arbor has been historically low, but that the city has experienced an uptick in foreclosures over the last few years.
However, Bowerbank said the presence of the University and the student housing market has helped keep down the number of foreclosures in Ann Arbor.

Though accommodating University students is what motivated the private sector to build more housing, ultimately creating a surplus, McClary said Ann Arbor benefits from the University because the school significantly contributes to the city’s service and entrepreneurial sectors. McClary said these are two key sectors that have kept Ann Arbor from heavily relying on the auto industry, the collapse of which has left some Michigan towns in financial ruin.

According to McClary, the city is entering the third phase of the foreclosure crisis in which people are leaving their homes and pursuing job opportunities in other states.

The first phase began in the mid-2000s, with predatory lending and subprime loans. It was during this time that McClary’s office set up a program that allowed Ann Arbor homeowners to modify loans.

McClary said the program took away some of the more predatory aspects of loans, and that the program was adopted in some other parts of the state.

The second phase began when massive numbers of Ann Arbor residents began losing their jobs, McClary said. During this time, home and commercial values were hit hard, as many people lost their homes because they couldn’t pay their mortgages.

McClary added that the problem was exacerbated when Pfizer Inc. moved its employees and offices out of Ann Arbor in 2007.

According to McClary, Pfizer promised to give its employees up to $100,000 if they sold their homes and moved locations to remain with the company. McClary said Pfizer was a large employer that contributed to the abundance of houses for sale in the city.

October foreclosure rates were astronomical in some other parts of the state. Monroe county’s 48145 ZIP code, home to La Salle Township, saw a 1,425-percent increase in foreclosures from last year — with one in every 12 properties in foreclosure. In Van Buren County, one in every 24 households was in foreclosure in the city of Breedsville.

Oakland County, one of the nation’s wealthiest counties, also experienced rises in foreclosures — with one in every 53 households in foreclosure in South Lyon Township.

Cities home to universities are not immune to foreclosures. The area surrounding Eastern Michigan University saw a 4.2-percent increase in foreclosure filings from September to October — a 54.3-percent jump from October 2009.

In Detroit’s 48202 ZIP code, home to Wayne State University, there was a 19.1-percent increase in foreclosures from October last year, though there was no increase in filings from September to October of this year.

Despite the University’s positive impact on Ann Arbor, it has not guarded the city from Michigan’s economic problems. McClary said there is a stereotype that the University protects Ann Arbor on all economic fronts.

“There’s not a brick wall between Ann Arbor and Washtenaw County,” she said.

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