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Most US property owners unaffected by an ‘exaggerated’ foreclosure crisis

While foreclosures have left millions of Americans no longer owning their own home, the problems are largely focused on just four states and elsewhere real estate prices are not plummeting, says the study from the University of Virginia.

Its authors claim that the crisis is felt in four key states – California, Florida, Arizona and Nevada – where property prices were the most overheated in the US housing boom.

But these are pockets of decline and overall reports that property values have plummeted nationwide are exaggerated, the examination of 50 states shows.

'In the Washington, DC metropolitan area, for example, prices have barely changed,' the say the authors William Lucy and Jeff Herlitz.

An analysis of the figures shows that 66% of potential property value losses in 2008 and subsequent years may be in California. With another 21% in Florida, Nevada and Arizona, these those four states made up about 87% of national declines.

'California had only 10% of the nation's housing units, but it had 34% of foreclosures in 2008,' the report points out. California was vulnerable to foreclosures because the median value of owner occupied housing in 2007 was 8.3 times the median family income, while the 2007 national average was only 3.2 times higher than median family income.

Another vulnerability to foreclosures was seen in the Los Angeles metropolitan area, where over 20% of mortgage holders were paying at least 50% cent of their income in property related costs.

But even in California there were enormous variations between counties. Solano County had 3.69% of foreclosure in November 2008, while only 0.24% were in the City of San Francisco – a 15 to 1 difference, the study found.