Loudoun Foreclosure Article in Washington Post Features Danilo Bogdanovic

Yes, this is shameless self-promotion so cover your ears or click "back" if you'd like…

The Washington Post ran an article entitled "2008 Foreclosures Mostly in Sterling, Leesburg" both, online and in last Sunday's Loudoun Extra print edition. The article talks about how most of the foreclosures and bank-owned properties in Loudoun County are in Sterling and Leesburg.

The piece features myself as well as data and a foreclosure map discussed at the Dulles Area Association of Realtors Economic and Housing Forecast Summit, which took place last month. 

If you haven't seen it, here's the online version of the article over at Living in LoCo/LoudounExtra.com.

Is there Another Wave of Foreclosures Coming to Loudoun in 2009?

An unprecedented wave of foreclosures has hit Loudoun County as well as the rest of the nation over the past few years. The primary source? "Subprime" loans and their high rate of default.

But there may be a second wave of foreclosures coming to Loudoun County thanks to "Alt-A" and "Option ARM" loans. Though previously thought of as less risky than "subprime" loans, many are saying that they will have the same, if not higher, rate of default as "subprime" loans. Most of these "Alt-A" and "Option ARM" loans have not yet "reset", but will begin doing so early next year.

Note: "Alt-A" and "Option ARM" loans don't fall into the category of "subprime" loans and have been virtually unaccounted for nor talked about until recently.

Consider this…

If you put a "heat" map of the US showing the number of "subprime" loans next to a "heat" map of the US showing the number of foreclosures and/or bank-owned properties, they look almost identical. The higher the number of "subprime" loans, the higher the foreclosure rate and number of bank-owned properties.

Assuming that "Alt-A" and "Option ARM" loans have the same, if not higher, rate of default, I can't imagine we'd get anything but the same result when comparing "heat" maps of these types of loans with future Loudoun foreclosure rates.

That being said, let's look at a "heat" map of "Alt-A" and "Option ARM" loans in Virginia (click to enlarge):

 

As you can see, there is a high concentration of "Alt-A" and "Option ARM" loans in the Northern Virginia area, including Loudoun County.

According to a recent 60 Minute special about "Alt-A" and "Option ARM" loans (check out the video), they are just now starting to reset with the worse to come in the next year to three years. If this hypothesis holds true and no real help becomes available for troubled borrowers, according to the map above, Loudoun will see another wave of foreclosures coming on the market over the next few years.

At this point, the data is limited though it's on economist's radar screens and there should be more coming out soon. As more becomes available, I'll keep you posted.

U.S. Foreclosure Statistics Show Mixed Signals

The most recent U.S. foreclosure statistics just released by RealtyTrac and CNN show mixed signals. September 2008 saw a 12 percent decline in foreclosure filings over August 2008, which is good. But it also was a 21 percent increase over September 2007, which is not so good.

Though the increase over last year is an important statistic to consider, the decline over last month is even more important because it's more relevant to how the current market is doing and where it's headed. If we see a continued decline in foreclosure filings as 2008 comes to an end, this will bode well for market in 2009. If not, the 2009 U.S. real estate market may not get off to such a great start.

What's interesting is that there's a quote in the CNN article that says,

The bad news: The housing market will be flooded with bank-owned homes. "We are estimating that by the end of this year, between one quarter and one third of all homes for sale will be bank owned properties," he said.

That could push down prices even more, perpetuating a vicious cycle, but it might also start to attract bargain hunters who may absorb some of the massive housing inventory.

Well, Loudoun County bank-owned and short-sale properties have made up one quarter to almost half of all homes for sale for almost 2 years now. And the bargain hunters and investors started coming out in packs to buy up that inventory well over a year ago and they're continuing to do so.

This just goes to show that Loudoun County and the DC metro area are ahead of the rest of the U.S. (as we usually are). Our boom market started before most of the country. The peak of our boom market (Summer of 2005) was ahead of most of the country. And the bottom of our bad market usually comes before the rest of the country's does. If they're calling for that "bad news" to happen just prior to the bottom for the U.S. housing market….well, it's already been happening here in Loudoun.