During the housing boom, these four states were among the favorites of speculators with many investors hoping to flip homes for fast profits. Now with the sub-prime crisis heating up, prices of homes have lowered and investor strategy is backfiring.
As a result, some investors have "simply walked away from their mortgages," said Doug Duncan, chief economist of the MBA, echoing recent comments from executives of Countrywide Financial Corp., the nation's largest mortgage lender.
Investor defaults are likely to add to the spate of foreclosed homes hitting the market over the next year or two, even as much tighter lending standards cut many potential buyers out of the market.
Economists at Goldman Sachs Group are predicting that home prices nationwide will fall an average of approximately 7% this year and in 2008.
Loans for properties not owner-occupied in Nevada, Arizona and Florida accounted for nearly a third of all home mortgages issued in 2005. The figure was 14% for California and 17% for the nation as a whole. The nationwide share for these primarily investor loans was in a range of about 5% to 7% in the 1990s, then jumped to 11% in 2002, 12% in 2003 and 15% in 2004.
In Nevada, homes that weren't occupied by the owner accounted for 32% of the prime-mortgage defaults recorded as of June 30, the MBA said. Such homes accounted for about a quarter of prime-loan defaults in Florida and Arizona and a fifth in California. For the nation as a whole, the figure was 16%.