Saturday, January 21, 2006

Defaults Continue To Mount In Dallas/Ft Worth

The Dallas News has a report on foreclosures in that area. "More people are losing their homes to foreclosure than at any time since the Texas real estate bust of the 1980s. As residential foreclosures jumped 30 percent from a year ago in North Texas, the average mortgage on foreclosed houses fell to $129,000, compared with almost $146,000 a year ago."

"The foreclosure hammer also recently fell on an Addison home valued at $1.5 million, a North Dallas house valued at nearly $870,000 and a Coppell property worth about $430,000. Connie Zetterlund, an agent who specializes in foreclosed property sales, says she's noticed increasing signs of trouble at lower-priced properties. 'The price ranges are a little lower than last year,' she said. 'There are a ton of foreclosures out there right now.'"

"That's not the only trend. Ms. Zetterlund has also noticed more trouble among newer mortgages, the ones acquired after the economic downturn earlier this decade. 'I'm seeing a lot of properties bought in 2004 and already going to foreclosure,' she said."

"Consumer Credit Counseling Service of Greater Dallas has seen an influx of people coming in with housing concerns. 'With the low interest rate, people are biting off more than they can chew,' said Gail Cunningham. 'They've been extended a loan that really eats up a significant part of their income.'"

"The last time home local foreclosures were so high was during the 'Oil Patch' recession of the late 1980s and early 1990s. The good news is that today's foreclosures make up a much smaller percentage of the overall housing market because the residential base in North Texas has more than doubled."

"Another difference: Back then, home defaults were often clustered in specific neighborhoods. These days, they're all over. George Roddy has tracked North Texas foreclosures for more than 20 years, said, 'I remember there were subdivisions in the late 1980s that had huge numbers of foreclosures. Today we are not seeing that, and it's so spread out that it doesn't focus on a subdivision or neighborhood,' he said."

"And while in the '80s most people owed more than what their houses were worth, the latest stats show that foreclosed homeowners have at least some equity. In the last foreclosure boom, lenders dumped houses and it wasn't uncommon to see property values fall by 30 or 40 percent in a neighborhood, Mr. Roddy said. Now, some real estate investors are looking at the Dallas-Fort Worth area as a place where bargains can be had for lender sales. So far, however, lenders are seeking top dollar for such homes, even if that means keeping them on the market longer, realtors say."

"'We certainly haven't seen the value loss like we had in the 1980s,' Mr. Roddy said. 'But if the foreclosure numbers hold up like we've seen for February, it could be pretty scary.'"

12 Comments:

At 10:19 AM, Blogger Ben Jones said...

'The good news is that today's foreclosures make up a much smaller percentage of the overall housing market because the residential base in North Texas has more than doubled.'

'Another difference: Back then, home defaults were often clustered in specific neighborhoods. These days, they're all over.'

Going back to 1989 should set off alarms, because that was a bleak time in Texas. The fact that the number of homes has doubled should provide little comfort, as that's just more inventory. I have read of speculators from out of state buying multiple new homes in Dallas area subdivisions. I expect we'll see entire cul de sacs flushed out.

 
At 1:21 PM, Blogger Metroplexual said...

Wow!

Ben as usual your analysis is excellent. I can't believe anything I read from the RE folks. They will tell up is down. DFW is one of the most affordable places in the country (that has a real economic base) right now. So will it be firesale Dallas Fortworth? This will get ugly.

 
At 2:06 PM, Blogger herb said...

I've noted quite a few places in my neighborhood (N Arlington) that have 'for lease' signs in the front lawn and have been completely empty since before Thanksgiving.

I have never thought there was much of a rental market for houses priced in the $200-250K range. I may call and find out how much these rent for.

 
At 2:16 PM, Blogger txchic57 said...

I continue to maintain that DFW will fall as hard if not harder than any coastal bubble market and that there is as much, if not more, stupid and predatory lending practices going on here.

 
At 2:19 PM, Blogger txchic57 said...

Ben, and you know these people have not done their homework and have bought in parts of town where it's difficult to rent out and has no chance of appreciation (Frisco, McKinney, Allen, Plano, anywhere in Tarrant County, etc.) I see the same rentals on Craigslist going on day after day for months with California phone numbers.

 
At 2:28 PM, Blogger Ben Jones said...

txchic,

The last time I was north of Dallas, the amount of construction I saw had me shaking my head. The drive time to decent jobs on those little two lane roads is something the speculators are clueless about. Anytime I see cows standing next to glitzy car dealerships (McKinney), I am skeptical.

 
At 1:07 PM, Blogger SlyAce said...

I see the same thing with respect to CA investors. Classic Property Management in Arlington is the worst offender of which I am aware. Most of their "clients" (aka "suckers") are from out of state. Do a search for available properties on their website:

http://www.classicpm.com/

Notice two things: first, how high the asking price for rent is relative to the prevailing market rent (about $200 too high). Second, if you do an address search online you will see that many owners are from out of state. Basically, they make their money on realtor commissions and price the properties too high to avoid the work of having to show them. One commission is more than 5 years of management fees.

On another note, the Beazer sales guy from Melissa called back on Friday and basically told me to offer 7k less than the current 20k plus 3% realtor commission discount on a 2,000 sq ft 4 BR with an non-discounted price of 162k. He said they were way behind on closings and would accept any reasonable offer with a January or early February closing. Even at 130k, the house is still at least 10k overpriced from a price/rent perspective. I figure that if they are offering these types of incentives now, imagine what it could be like in the summer?

 
At 1:12 PM, Blogger tageinn said...

In the first paragraph of this article it states the market is healthy then states foreclosures are at their highest since the oil bust of the 80's.This is like saying the patient is doing well except he has a terminal illness.

 
At 2:25 PM, Blogger Ben Jones said...

Slyace,

I lived in Arlington when I was a RE major at the UT branch there. The day I made up my mind to leave, I spent a full hour drving to the little shop that was on the same block.

Arlington grew from 50,000 people to 250,000 in five years as I recall. The planning for infrastructure was very poor. If a person lives in the 'mid-cities', as they are called, they better like their car.

BTW, I put up a link to the foreclosure site that was posted on the HB2 in the sidebar.

 
At 3:32 PM, Blogger SlyAce said...

***The day I made up my mind to leave, I spent a full hour drving to the little shop that was on the same block.***

Sorry, but I do not understand. What is "the little shop?"

Thanks for the links and all the work on the blog.

 
At 4:12 PM, Blogger tjtex said...

Texas has more than its share of Real Estate problems. It looks like the lack of enforcement by the Texas Real Estate Commission is becoming a hot issue in the Governors race.

wichitafallsrealestatecomplaints.com has more

 
At 12:06 PM, Blogger txchic57 said...

slyace: I see people (mostly property managers and "investors") attempting to get some truly ludicrous rents in the DFW area. Needless to say, these properties remain empty. Here's a few examples

http://dallas.craigslist.org/apa/127779486.html

this one's a frigging apartment!

http://dallas.craigslist.org/apa/127762533.html

http://dallas.craigslist.org/apa/127676643.html

http://dallas.craigslist.org/apa/127447390.html - 900 square feet!

The Texans see this bunch coming.

 

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