The Pareto Principle is a statistical concept most commonly known as the 80/20 Rule, and is commonly applied in a variety of situations. for example "20% of the salesmen make 80% of the sales" or put another way "20% of your efforts generate 0% of your results"
Iin other words 80 percent of the effects come from 20 of the causes according to this principal.
Based on data from May, 11 states accounted for 80% of the country's foreclosure activity. The remaining 20% was spread across the 39 others.
That's 80/20 almost to the tee.
Clearly, foreclosures are concentrated in certain geographies, generally where the spike in the real estate market was the greatest. Put another way, the places with the greatest increases, saw the greatest decreases in price, and were subject to the greatest abuses in mortgage lending. As a result these states are seeing the largest amount of foreclosures
But, even in Pennsylvania,where we are not suffering from as difficult a market as other places in the country, foreclosures still impact us. This is because mortgage lenders are often national companies, lending in all 50 states.
When home loans go bad -- in any state -- lenders respond by increasing downpayment requirements and by adding new borrowing hurdles. If you've applied for a mortgage in the last 18 months, you've experienced this phenomenon personally.
On the other side, if you're a home buyer in a foreclosure-heavy state, you're finding terrific value versus several years ago. It's one reason why Existing Home Sales in the West Region are up by 19 percent from last year, for example.