The Foreclosure Report

Lenders Hold Thousands Of Homes: D/FW

The Dallas News reports from Texas. "Foreclosure signs are popping up in front of thousands of Dallas-Fort Worth homes for sale this spring. 'I'm finding more of them when I look at the listings in a neighborhood for comparable prices,' said Carrollton real estate agent Wendy Hulkowich. "The foreclosure market is definitely affecting our listing price comps.'"

"Last year, lenders foreclosed on more than 18,000 homes in the D-FW area, according to research by Foreclosure Listing Service Inc. During the same period, about 38,000 single-family homes were listed for sale in the multiple listing services. Currently, about 6 percent of the MLS listings in North Texas are identified as former foreclosures. But those numbers don't include nearly all of the repossessed properties, agents say."

"'I think the price impact will start showing up this year,' said James Gaines, an economist with Texas A&M University's Real Estate Center. 'In subdivisions where foreclosures may run as high as 20 percent or more, we can anticipate not just a slowdown in price increases, but price declines and perhaps significant – greater than 5 percent – price declines.'"

"The good news is that unlike the late 1980s slump, home foreclosures haven't been concentrated in particular areas of the city. A study of April's foreclosure postings shows a wide distribution of homes facing forced sale."

"But if home foreclosures continue to rise, they are up 15 percent so far in 2007, the resale of these properties will put a damper on home appreciation. That's more likely to be the case if lenders decide they need to more quickly unload the thousands of homes they are now holding."

"So far they aren't dumping foreclosures, agents who sell the properties say. 'They are cutting prices, but so far not a lot,' said Connie Zetterlund, a Dallas residential agent who specializes in sales of foreclosed homes. 'But because of what is in the pipeline, I think we will be seeing some price cuts. When a neighborhood has so many foreclosures, they have to do something to sell the properties.'"

"Getting the homes out of their hands takes time. Agents said that it can be two to four months after a property is sold at foreclosure before it comes up for sale. 'They are hanging onto the properties longer,' said Ms. Hulkowich. 'They are overpriced. Once in a blue moon you can actually find a good deal on a foreclosure property.'"

"She estimates that the foreclosed homes she sees on the market have been discounted from 11 percent to 14 percent to start. But many of the houses need expensive repairs, Ms. Hulkowich said."

"Ms. Zetterlund said the lenders she works with who are selling higher-priced homes are more willing to spend money to fix them up. 'But at the lower end, they often won't,' she said."

"The average home foreclosed on in the D-FW last year was valued at about $145,000, according to Foreclosure Listing Service. That tracks with the average pre-owned home sales price in the area last year."

"Collin County had the highest average foreclosed home value at $185,197. The largest number of foreclosures, about 8,600 homes, was in Dallas County. Tarrant County was second, with about 5,600 homes foreclosed on by lenders."

"About 44 percent of the homes posted for foreclosure in 2006 were actually sold at auction to the lender. Only about 7 percent of the foreclosure auction sales went to third-party buyers who bought the house on the courthouse steps, Foreclosure Listing Service found."

"Wells Fargo Bank, Deutsche Bank, Bank of New York, U.S. Bank and Chase Home Financial had the largest number of home foreclosures during the first quarter of 2007, according to public records surveyed by Foreclosure Listing Service. In the first quarter, these five lenders alone foreclosed on almost 2,000 D-FW area homes."

"'The subprime lenders deserve some of the bad rap,' said George Roddy, chief executive of Foreclosure Listing Service. 'But the foreclosures are widespread among regular lenders. A lot of it is home equity loans and second liens.'"

"In some cases the companies foreclosing on the homes just service the mortgages and didn't originally make the loans."

"Officials with Fannie Mae, the country's largest source of mortgage funding, say they are working in markets all over the country to make sure the foreclosures they sell don't add to the housing sector's problems. 'We have an economic interest in what is going on in these communities,' said Jason Allnut, a vice president for credit loss management with Fannie Mae. 'We have lots of loans that are performing right next to our foreclosed assets.'"

"Fannie Mae knows that if it poorly handles its foreclosed houses it can be a drag on the rest of the neighborhood, Mr. Allnut said. And not just because of pricing. 'Foreclosures can, if let alone, be a huge negative impact on a community, not just from a home price perspective,' he said. 'If you don't secure a home and don't get it back on the market with people living in it, it can become a magnet for crime.'"

"The Department of Housing and Urban Development currently has about 500 foreclosed homes for sale in the Dallas area. After pricing the homes and putting them on the market, HUD may mark the price down in 45 days if it hasn't sold, said HUD spokesman Lemar Wooley. If that doesn't work, the home price can be cut again."

"'The initial list price is based upon the 'as is' appraised value of a property,' Mr. Wooley said. 'Approximately 76 percent of our properties are listed at any given time.'"

"But some owners of foreclosed homes may decide to 'cut and run' as their inventories of foreclosed homes grow, said William Brueggeman, chairman of the real estate department at SMU's Cox School of Business."

"Dr. Brueggeman saw firsthand the impact of lenders dumping foreclosed homes in Texas in the late 1980s. 'I don't see things this time getting that bad,' Dr. Brueggeman said. 'It's certainly going to flatten things. I wouldn't be looking for too much home appreciation,' he said. 'The entry-level homes are going to see more of the brunt.'"

posted by Ben Jones @ 12:35 PM