story by Kim Souza
The ongoing real estate recovery is making progress in better pricing and increased sales but increased foreclosures activity and rising interest rates could cool local markets in the coming months.
Arkansas ranked highest in the nation last month in bank repossessions, up 145% from the same period in 2012, according to RealtyTrac.com.
Bank repossession is the final stage in the foreclosure process which can take between 180 to 550 days to complete depending on state laws and complications for secondary liens.
There were 793 new foreclosure filings in June across the Natural State, up 99% from a year ago. So far this year, 4,625 households in the state had at least one foreclosure filing, according to RealtyTrac.
Benton County has also been active reporting 103 new filings in June, up 83% from a year ago. There were 53 new foreclosure filings in Washington County last month, up 55% from the year-ago period.
The Fort Smith metro area also saw a rise in June foreclosure activity. Filings rose 58% in Sebastian County with 19 new cases. In Crawford County there were 23 filings, up nearly 44%, according to RealtyTrac.
While foreclosures activity is heating up, the number of properties involved is far from the volume seen between 2007 and 2010.
Litigation in federal court stalled hundreds of foreclosures across Arkansas between late 2011 through most of last year for banks domiciled outside the state. An appellate court ruling handed down on Tuesday (July 9) affirmed the lower court decision that allows J.P. Morgan and other banks based outside the state to use the non-judicial method of foreclosure.
Arkansas law provides lenders with an abbreviated method of foreclosure, known as “statutory” or “non-judicial.” This method does not require a judge’s signature or legal court proceedings.
Now that the litigation has been resolved, lenders continue to push inventory back onto the market. In some cases these homes have sat vacant for two years or more. Agents say now that inventories are extremely low, lenders are more eager to list these properties for quick sale. There are 296 bank-owned homes in Northwest Arkansas listed for sale in the Multiple Listing Service
The distressed home inventory is down from 306 listings this time last month, according to Jim Long, agent with Crye-Leike Realty in Bentonville. Distressed listings have risen from 249 in April and 222 in March and includes all four counties in this report.
Since July 1, there have been 44 new listings of bank-owned homes, priced from $429,000 in Shadow Valley down to $36,360 in eastern Rogers, according to Long.
“We are seeing more of these distressed listings but they are selling pretty quickly,” Long said.
Agents from Bentonville to Fort Smith have sold 678 bank-owned properties this year, which is roughly 16% of the total market activity, according to MountData.com.
“Halfway through 2013 it is becoming increasingly evident that while foreclosures are no longer a problem nationally they continue to be a thorn in the side of several state and local markets, particularly where a backlog of delayed distress has built up thanks to a lengthy foreclosure process,” said Daren Blomquist, vice president at RealtyTrac.
He said lenders will push more properties on the market, which could have a slight dampening effect on price gains seen in recent months.
George Faucette, CEO of the Northwest Arkansas Coldwell Banker franchise, said the price gains realized over the past year because of reduced inventory will be tested in the coming months as more distressed sales are recorded.
Real estate experts say rising interest rates are the biggest threat to the housing recovery, and that’s because foreclosures remain a small percentage of the overall market.
A recent spike in interest rates is a concern, according to research conducted by Trulia.com. An online survey found 56% of consumers who were buying now said at 6% they would be discouraged enough to walk away.
Rates have moved higher for the past six weeks, which is a concern for buyers in more expensive markets.
Nationally, the 30-year rate was 4.48% on Wednesday (July 10), up from 3.52% since May 1, according to Bankrate.com
Analysts said rates under 5% are still a great deal, but with each rising percentage point buyers are forced to shave back the amount they can spend. This is deemed problematic now that home prices are also moving higher.
Long said agents are watching rate sheets far more closely these days because higher interest levels do reduce buying power.
Foreclosure Filings (January through June)
State of Arkansas