Wednesday, July 23, 2014

Foreclosures increasing and getting personal

April 16, 2010 |

Democrat real estate columnist

As a real estate professional, I observe and write about the real estate and mortgage market with some degree of analytical detachment. I am a student of numbers, percentages and graphic trends, all of which I digest and attempt to put into some interesting, readable format consisting of 900 words.

When asked to provide an opinion of value to a homeowner considering selling his home, my evaluation is calculated on a series of sales numbers reflecting the statistical average. Property listings are not viewed as a familyÕs home, filled with memories and emotions but reduced to square footage and MLS search fields.

Some degree of unemotional detachment is of course necessary in order to assist clients in making the correct decisions. I may be terrified when my dentist points his foot long needle at my mouth and says ÒYou may feel some pressure,Ó Ñ but I donÕt expect him to be terrified. Most homeowners are, understandably, emotionally attached to their homes and homebuyers are generally too enthusiastic about the process. Navigating between the two extremes requires some degree of objectivity.

In the past, I may have been guilty of some indifference to all the foreclosure numbers. None of my friends and clients had lost a home to a foreclosure and several of my clients have taken advantage of the opportunities to buy a price discounted foreclosed home. Besides, what can be done about the situation that hasnÕt been tried already? My ambivalence is changing. Foreclosures are starting to get personal.

There are 14 houses on our rural country road. Two are in some state of foreclosure. ThatÕs not supposed to happen in this upper middle class neighborhood where home values, not too long ago, ranged from $500,000 to $800,000. We all understand that foreclosures are a sad reality of our current market but when it happens on your street to your friends and neighbors, it changes the dynamics from a statistic to a personal tragedy.

I remember when Bryan and Shirley purchased the 10-acre parcel on the corner back in 2005. It was the most expensive 10-acre parcel at $350,000 but it had the best view of Folsom Lake. Bryan is a pool contractor and they had sold their home in Folsom to move to the foothills. It took a year and every dime of their savings for Bryan to finish the 3,500 square foot Spanish villa style house. The pool business collapsed along with the demand for high end rural homes. Unable to keep up with the payments, Bryan and Shirley are staying in the home until the scheduled trustee sale.

That same year, Marty and Beth purchased a 1,700 square foot resale at the end of the road for $500,000. Marty was in construction sales and Beth worked part time from home. Two years after they moved to the neighborhood their son Josh joined the Marines, a year after that he was sent to Iraq. Today, the house stands vacant. Marty lost his job in December and Beth has been unable to work after her surgery. They have abandoned the home and moving back east where they have family.

The percentage of homes on my street that are on the foreclosure path, mirror the national average according to a recently released report from the Office of Thrift Supervision, which found 14 percent of all mortgages are in some stage of delinquency or foreclosure. ThatÕs 8 million U.S. households! The numbers are increasing, predominantly among prime borrowers. The increase in Òseriously delinquentÓ, 90 days or more, overdue jumped 21 percent over the previous quarter. It was the seventh consecutive quarterly increase in delinquencies.

As long as mortgage delinquencies continue to increase, there will be no reprieve from foreclosures and their devastating effects on property values and peopleÕs lives. State laws delaying the foreclosure process has not reduced the number. Federal loan modification programs have had little effect. We are spending massive amounts of taxpayer dollars for foreclosure help lines, counseling and other foreclosure-prevention efforts with no decrease in the number of families who are losing their homes.

Selling off foreclosed, REO inventory quickly has been a reliable strategy employed in reducing the excessive numbers. Lenders will usually price a property where it will sell quickly and take their loss. After all, it isnÕt their money. The problem with relying exclusively on this proven strategy of quick liquidations is the process destroys all property values.

An alternative to lowering the price for a fast sale is creating incentives to Òbuy now.Ó State and federal tax credits for homebuyers have historically stimulated the housing market and subsequent REO sales. But there is some evidence that their continued offering, like the perpetual furniture store sale, is less of a motivation for buyers when buying a home. Homebuyer tax credits are becoming routinely expected. First time buyer programs are only effective if there is a plentiful supply of Òfirst time buyers.Ó

ÒItÕs the economy, stupid.Ó That talking point was used successfully in Bill ClintonÕs 1992 presidential campaign. It applies today to the successful recovery of the housing market. Foreclosures will not decrease until mortgage delinquencies decline and thatÕs not going to happen until we have growth in jobs and the economy. Until then, we should be prepared for another large increase in foreclosed homes and more personal tragedies.

Ken Calhoon is a real estate broker in El Dorado County. He can be reached at





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