California, Arizona and Florida show signs of economic stability

Even as Americans suffer rising unemployment, foreclosure rates in three states hit hardest by the housing bust — California, Arizona and Florida — stabilized in June, offering hope that the worst of the real-estate crisis is over, according to The Associated Press' monthly analysis of economic stress in 3,100 U.S. counties.

Yet mounting unemployment is hampering an economic recovery in some regions, especially the Southeast and industrial Midwest.

The AP calculates a score from 1 to 100 based on a county's unemployment, foreclosure and bankruptcy rates. A higher score, the higher the economic stress. The average rose to 10.6 in June, up from 10 in May, mainly because of rising unemployment.

A year earlier, in June 2008, the average county's Stress score was 6.7. The pain was lower then because the economy was still expanding. In fact, the second quarter of 2008 was the last time the economy grew.

The national economy shrank at a pace of just 1 percent in the second quarter of the year, according to figures released last Friday. It was a better-than-expected showing that provided the strongest signal yet that the recession is finally winding down.

The housing bust struck first in states such as California, Arizona and Florida, which had seen outsized price increases during the real-estate boom.

Now, California's real-estate market, for one, is improving by most measures.

Sales increased 20.1 percent in June, and prices rose for the third straight month, according to the California Realtors' Association.

"It looks like we're past the peak in foreclosures," said Steve Goddard, president-elect of the realtors' association. "Most bank-owned properties are receiving multiple offers."

Meanwhile, the sharpest year-to-year rise in bankruptcy rates in June occurred in counties in California and Nevada that have been the epicenter of the housing bust, along with areas of Georgia and Tennessee.

Among states, Nevada, Michigan and California showed the most economic distress, with Stress scores of 20.41, 18.34 and 15.78, respectively.

In June, Nevada had the nation's highest foreclosure rate (7.3 percent) and the fifth-highest unemployment rate (12 percent). Michigan had the nation's highest unemployment rate in June (15.2 percent) and the sixth-highest foreclosure rate (2 percent). California had among the nation's highest unemployment (11.6 percent) and foreclosure rates (3.5 percent). The states with the biggest year-to-year change for the worse were Nevada, Oregon and Michigan.