America's Next Foreclosure Capitals

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Orlando, Fla. Foreclosures as percent of all homes: 0.65% Mortgage write-off rate 2008: 3.89% Mortgage write-off rate 2009 (projected): 4.38% Percent change: 12.5%

"It's so far from recovery," says Doug Duncan, chief economist of Fannie Mae. He says the ability to sell a home in the Sunshine State is not related to price, especially in the condo sector. "You can drop the price to zero and not sell a brand new property because there's no one there to buy it."

As a result, many would-be sellers confronting rapidly falling prices are opting to walk away from their homes.

It's not much better in California, home to five of the top 10 cities on our list, including Fresno, Santa Cruz, Merced and Santa Barbara. Here, foreclosures are expected to rise between 11% and 14% next year. Job growth figures are better than in Florida, and new housing permits have begun to bottom out, cutting into supply. Even though prices are down, transaction activity has surged 17% in San Diego, 21% in Los Angeles and 32% in Sacramento from last year, according to Radar Logic, a New York-based research firm.

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Oxnard, Calif. Foreclosures as percent of all homes: 0.66% Mortgage write-off rate 2008: 2.41% Mortgage write-off rate 2009 (projected): 2.6% Percent change: 11.7%

"We're starting to see signs of a bottom in some places in California," says Scott Hoyt, a senior director of consumer economics at Moody's Economy.com. "Those places were the first places to crash. Now they're further into the foreclosure cycle. It looks like permit activity is starting to bottom out."

Behind the Numbers

In compiling our list, we looked at the country's 50 largest foreclosure markets based on mortgage write-off rate. This measures mortgages that have fallen in value or dropped to zero as the result of foreclosures. In Miami, Fla., for example, the 2008 mortgage write-off rate was 6.2%, meaning that $6.20 of every $100 of the overall mortgage market has evaporated due to foreclosure. Data come from Moody's Economy.com and Equifax, a credit research firm.

Moody's then provided for each area 2009 forecasts based on job loss and the expected number of ensuing delinquencies and defaults.

Occupational Hazards

Jobs are an obvious factor: the less income people have, the less likely they can afford their mortgages.

In Miami, Fla., and Jacksonville, Fla., projected job growth is expected to drop .4% and .3%, respectively. In other spots, including Santa Barbara, Calif., and Oxnard, Calif., job growth is expected to be flat.

At present, numbers from the Bureau of Labor Statistics and Moody's suggest that peak to trough, the macro economy will shed a net of 1.3 million jobs. That's bad news for the year ahead. Worse: Even when indicators like credit quality and job growth start to improve, there's usually a lag of a few months before it shows up in housing.

Throw in plummeting prices and some places will feel the hurt more than others.

"Declining house prices with ongoing job losses [means] the housing cycle is still deteriorating," says Hoyt. "Yes, we may be getting toward the bottom on construction activity, but we're not there in terms of price or credit quality."

In July, the Case Shiller Index fell 17.5%; year-over-year prices in Las Vegas and Phoenix fell almost 30%.

"That was my worst fear," says Duncan. "Traditional foreclosure factors like job loss in the private sector look like they're going to peak at the same time as the peak of non-traditional factors like price declines."