Dramatic increase in local foreclosure numbers

Archuleta County residents ensnared in the foreclosure crisis take no consolation from knowing that they are part of a national trend. In fact, foreclosures in the county for 2008 are not only well ahead of last year’s numbers but also a great deal higher than national figures.

In a report released last month by the foreclosure listing service RealtyTrac, foreclosures nationwide were up 71 percent for the third quarter of 2008, compared with the same time last year. And in a report released last week, more than 84,000 properties were repossessed in the U.S. in October, RealtyTrac said.

In comparison, foreclosure numbers released by the county treasurer’s office show an increase of almost 230 percent from all of last year. Archuleta County saw a total of 49 foreclosures in 2007, while the county has tallied a total of 112 foreclosure starts as of Nov. 12, 2008.

County Treasurer Kelly Evans said late last month that she “expects them (foreclosures) to come close to tripling by the end of the year,” relative to the 2007 foreclosures.

Nationally, more than 279,500 homes received at least one foreclosure-related notice in October, up 5 percent from September. Foreclosure filings, such as a default notice, auction sale notice or bank repossession, affected one in every 452 housing units. By year’s end, more than a million bank-owned properties could flood the market, representing around a third of all properties for sale in the U.S., RealtyTrac reported.

For homeowners in Archuleta County trying to sell a property, the foreclosure rate presents a problem in getting a fair market price for their home. With foreclosure sales commanding bargain basement discounts, neighboring property values could be negatively affected. According to RealtyTrac’s vice president for marketing Rick Sharga, “It has a pretty significant impact in terms of pricing.”

Unfortunately, U.S. home prices are expected to continue to decline by as much as 3.5 percent next year, following a 6 percent drop so far this year.

Lynn Cook, Broker-owner of Four Seasons Land Co. and the only licensed REO (Real Estate Owned) specialist in southwest Colorado agrees with RealtyTrac’s assessment. “I am seeing a real drop in home values due to the number of foreclosures,” she said in a phone interview, stating that foreclosures in the county are not restricted to any single type of home. She indicated the national trend in declining home prices is reflected locally.

“It’s all over the board, everything from the very minimum valued to $1 million dollar homes. Second homes, first-time buyers, second mortgages, vacation homes, investment groups ... there’s no one sector in our area that is not getting hit.”

Speaking for herself, Cook added, “In my opinion, we’re going to see values in the area continue to drop through the winter, level off in the spring, then start rising again next summer.”

Cook added, “Our area is unique in that it is a resort area that’s not really a resort area,” stating that, in her opinion, Archuleta County could see a recovery in the housing market earlier than other areas of the country because of the county’s unique circumstances.

Six states accounted for more than 60 percent of all foreclosures in the last quarter, with California, Florida, Arizona, Ohio, Michigan and Nevada at the top. Of the six, California alone had more than a quarter of all U.S. foreclosure filings. Placing 10th on the list, Colorado did see some positive news, with a foreclosure activity rate down by more than 6 percent in September from August and nearly 31 percent lower than the same month in 2007.

Looking to the future, a combination of sinking home values, tighter mortgage lending criteria and an economy that has already slipped into recession (see the Page 1 article) is leaving hundreds of thousands of homeowners in dire straits. With a global credit crisis making loans more difficult to obtain from many traditional sources, homeowners can’t refinance into an affordable loan, many more owe on notes that exceed the home’s worth, and others can’t find any buyers.

Although the federal government has stepped in with a $700 billion dollar bailout, Treasury Secretary Henry Paulson said last Wednesday that the rescue package won’t purchase any troubled assets. Saying the plan would take too much time, Paulson said that the Treasury would instead buy stakes in banks and encourage banks to resume more normal lending.

In another plan announced Wednesday, Housing and Urban Development Secretary Steve Preston said the government may let more borrowers qualify for a $300 billion program designed to let troubled homeowners swap risky loans for more affordable ones. Concerns have been voiced that lenders might not participate because it would require banks to voluntarily reduce the value of a loan and take a loss.

Until the economy begins a noticeable recovery, however, local homeowners could continue to see home values fall. Cook is nonetheless optimistic that Archuleta County will recover quicker than the rest of the nation. “People with money are going to keep spending money,” she said. “They’re going to invest money during hard times and sit on those properties for the next two to three years and end up making a profit.”