Regional and statewide foreclosure activity slows in February

by The City Wire staff ([email protected]) 124 views 

Foreclosures continue to be a smaller part of the local housing markets of Northwest Arkansas and the Fort Smith metro area. Irvine, Calif.-based RealtyTrac reports just 398 foreclosure filings across the entire state last month, down 50% from a year ago.

There were 254 new foreclosures started and another 144 completed at the state level in February. Starts plunged 63% and completions decreased 44% from the year-ago period.

County Statistics (February)
Benton County: 50, down 62%
Washington County: 26, down 59%
Sebastian County: 11, down 54%
Crawford County: 8, down 60%

RealtyTrac reports 112,498 new foreclosure filings for February, down 27% from a year ago, the lowest monthly total since December 2006.

“Cold weather and a short month certainly contributed to a seasonal drop in foreclosure activity in February, but the reality is that new activity is no longer the biggest threat to the housing market when it comes to foreclosures,” Daren Blomquist, vice president at RealtyTrac, said in the report. “The biggest threat from foreclosures going forward is properties that have been lingering in the foreclosure process for years, many of them vacant with neither the distressed homeowner or the foreclosing lender taking responsibility for maintenance and upkeep of the home — or at the very least facilitating a sale to a new homeowner more likely to perform needed upkeep and maintenance.”

Blomquist refers to these vacated properties as “zombie foreclosures.” The report shows roughly one in four homes in foreclosure across the U.S. has been vacated by the owners. While Arkansas is not among the states with the most “zombie foreclosures,” it did record the longest foreclosure time for owner-vacated homes (1,128 days).

Experts say when vacated homes linger it’s a drain on the neighborhood valuations and they contribute to a climate of uncertainty and low inventory in local housing markets.

Jim Long, agent with Crye-Leike Real Estate in Bentonville, said there are 273 foreclosure filings in the local multiple listing service which includes all four of the counties in this report as well as Madison County and McDonald County, Mo.

Long said the number of new foreclosure listings continues to dwindle. This time last month there were 301 properties for sale, down from 322 in December. He said since the moratorium was lifted in 2012 foreclosure listings peaked in August of last year at 373 and continue to decline.

“The foreclosure listings we are seeing today are for homes in the $100,000 to $125,000 range on average. This is quite a bit higher than the $50,000 to $99,000 range we getting in the past two years,” Long said.

Some experts warn that the lull in foreclosure filings across much of the country during early 2014 is the calm before the storm. There are plenty of eyes on the estimated 800,000 U.S. homeowners who took advantage of mortgage loan modifications in 2009 who are facing loan resets this year. This will require once-financially strapped borrowers to come up with a higher mortgage payment — in some cases up to $302 per month over the term of the reset, according to a report from PricewaterhouseCoopers (PwC).

This report estimates between $400 billion and $500 billion in modified loans at risk for redefault. In Arkansas there were 1,825 homeowners with active modifications, and 81% of those are subject to payment increases within five years of their original modification. 

While the economy is on stronger footing than in 2009, the report warns that consumer balances sheets have little buffer to absorb higher mortgage payments as they have taken on more debt. Consumer indebtedness rose to $11.52 trillion as of Dec. 31, up 2.1% from the third quarter, according to a report by the Federal Reserve Board of New York. That report found that 2013 was first four quarters to register a net annual increase ($180 billion or 1.6%) in debt since 2008.

PwC reports that mortgage delinquencies are improving, but at 10% the loans aren’t recovering as quickly as other consumer loans.