Foreclosure Freeze “Icing” Loudoun Real Estate Market

President-Elect Obama said he wants to put a 90-day moratorium on foreclosures once he takes office, but Countrywide/BoA, Chase and Citi aren't waiting until January 20 to start "freezing" foreclosures. The effect of this is already being felt in Loudoun County as less new foreclosure/bank-owned properties are coming on the market.

For example…I just did a search for active bank-owned and short-sale town home listings in Ashburn Village and found that over 90 percent of them were short-sales. The ratio has recently been about 60/40 (foreclosures to short-sales)

One effect of this is that buyers will be further frustrated with the purchase of a home. Short-sales take 3, 4 sometimes 6 months for a response and only about 20 percent get approved so they work for only a select few buyers that have that kind of flexibility and patience. With the rising number of short-sales and diminishing number of foreclosure listings and traditional resales on the market, buyers are left with less "real" inventory to choose from than they have in years.

(Short-sales are not "real" listings in my book because the seller doesn't even know if the short-sale will be approved by the bank while listing the property)

What will happen when the "freeze" ends? We'll see more foreclosure properties hitting the market once again. As much as this may sound like a bad thing, it's actually a good thing. We have to get through the bank-owned property inventory one way or another before we can see the market rebound. Plus, it will give buyers more "real" inventory to choose from.

 

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.

Demand For Distressed Properties Outpaces Supply For First Time

The foreclosure/bank-owned and short-sale portion of the Loudoun County real estate market has been steadily improving over the last 6 months. But last month brought some of the best news we've had in a long time - demand outpaced supply!

For the first time since the market turned, there have been more distressed properties sell than new ones come on the market in a one month period. August had 326 distressed properties sell versus 306 new ones come on the market.

Here's a graph showing new listings (supply) versus solds (buyer demand) for 2008 (click to enlarge):

 

Notice that in January, the number of new listings was more than double the amount of solds. Since then, the number of solds has been steadily increasing. The number of solds in August was more than double those in January.

As for inventory, there was a spike in new distressed property listings last spring, but it's back down to the 300 per month level.

This is very good news for not only the foreclosure/bank-owned and short-sale property market, but the Loudoun County real estate market in general. The key ingredients to a stabilization of the market is lower inventory and higher demand, which is what we're seeing across the board in Loudoun County.

Related Articles

No "Summer Slump" For Loudoun County Real Estate In 2008

Loudoun County Real Estate Market Statistics - 1st Half 2008 vs 2007

Loudoun Real Estate Inventory Levels Well Below National Average

Loudoun County Foreclosure/Bank-Owned and Short-Sale Statistics - July 2008

With all the hype and talk about foreclosure/bank-owned and short-sale properties, especially in Loudoun County, you’re probably wondering what that segment of the real estate market is up to. Let’s look at the statistics to find out…

Supply/Inventory

• The number of foreclosure/bank-owned and short-sale properties that came on the market in July 2008 was 318. This is an 8 percent increase from June 2008 (318 versus 291).
• The number of foreclosure/bank-owned and short-sale properties that came on the market in July 2008 was 45 percent more than in July 2007 (218 versus 175). This statistic in itself does not look very good, but let’s continue looking at buyer demand and then look at the overall picture.
• New foreclosure/bank-owned and short-sale listings comprised 47 percent of the total new listings in Loudoun County in July 2008

Demand

• The number of foreclosure/bank-owned and short-sale properties that went under contract (aka sold) in July 2008 was 299. This is a 12 percent increase from June 2008 (299 versus 263). This is a key statistic because July is usually slower than June when it comes to buyer activity and shows that buyer demand for these types of properties is up.
• The number of foreclosure/bank-owned and short-sale properties that sold in July 2008 was 440 percent higher than in July 2007 (299 versus 68). This shows a huge year over year improvement that has been the general trend in Loudoun County so far this year.
• Foreclosure/bank-owned and short-sale properties comprised 54 percent of the total number of homes sold in Loudoun County in July 2008

Although inventory is up, buyer demand for distressed properties has risen tremendously helping to absorb these new properties/listings and stabilize the market. For example:

• In July 2007, the ratio of new listings to buyer demand was 5:2 (for every 5 new listings, 2 went under contract/sold).
• In July 2008, the ratio was almost 1:1.

Although we haven’t seen the flow of foreclosure/bank-owned and short-sale properties slow down, buyers and investors are out in full force buying them up. The fact that buyers and investors are out is great news for not only the distressed property market in Loudoun, but the overall Loudoun County real estate market.

In a nutshell, despite increased inventory, the distressed property segment of the market is showing improvement. It’ll be even better once we see new inventory start to plateau and eventually go down while buyer demand stays strong. And if Loudoun County gets involved in buying up foreclosure/bank-owned properties like Fairfax County is going to do, that’ll be even better.

Related Articles

Foreclosure/REO and Short-Sales Selling Like Hot Cakes

Loudoun County Top 10 Places To Buy Foreclosures

Loudoun County Real Estate Market Statistics - 1st Half 2008 vs 2007

Loudoun County Real Estate Market Looking Up! (Come Check Out The Stastistics)

Loudoun Real Estate Inventory Levels Well Below National Average

US Foreclosure Filings Up 121 Percent

The numbers aren’t great - U.S. foreclosure filings are up 121 percent over last year. They rose 14 percent in the second quarter, the eighth consecutive quarterly climb. These numbers are according to RealtyTrac and the figure is a total of default notices, auction sale notices and bank repossessions between April and June.

The government is trying to help by passing a mortgage rescue plan, which includes $4 billion in grants to local communities to buy up foreclosed properties that may be negatively affecting the communities. Fairfax County recently approved such a program, but Loudoun County is yet to do so though they’ve been discussing it for a while now.

The good news for us in Loudoun County is that most of the activity is coming from a small number of states such as Nevada, California, Florida, Ohio, Arizona and Michigan. Yes, the DC metro area including Loudoun County has been hit hard. But there are lots of investors and traditional home buyers buying up foreclosure/bank-owned properties, which is helping to keep the inventory down and softening the blow a bit around here as compared to other areas of the country.

Graph courtesy of RealtyTrac

Frustrated In Your Search For Foreclosure/Bank-Owned and Short-Sale Properties?

Does "frustrated" describe how you feel when trying to search for foreclosure/bank-owned and short-sale properties online? You’re not alone. Buyers often ask me why they can’t just click a search field labeled "bank-owned" or "short-sale" and pull up those types of properties on listing sites. Here’s the answer to that question:

Listing sites…

Realtor.com, HomesDataBase.com and other listing sites generally get their data from either the local MLS and/or a straight data feed from brokerage firms such as Keller Williams, RE/MAX, Century 21, etc. There are certain "standard" fields that data is pulled from. That data is then auto-populated into the listing site’s template.

MLS’s/MRIS…

Unfortunately, there is no field or check box labeled "Foreclosure/Bank-Owned" or "Short-Sale" for Listing Agents to use when uploading a listing into the MRIS. Because of that, there is no way for listing sites to pull "foreclosure/bank-owned only" or "short-sale only" data. Therefore, there is no way for you, the consumer, to search for only those types of properties.

But agent’s can search for them…

Yes, we can. But there’s no "magic button" or "insider trick" for us either. When searching for these types of properties, I have to check off several search fields such as "As is condition clause required", "Relo/bank addendum required", etc. Then I have to manually go through each listing to see whether it’s a foreclosure/bank-owned or short-sale property (or relo - they get thrown into that mix too). I check the agent-only remarks, tax records, owner records, etc. It’s frustrating for myself and other agents as much as it to you, the consumer.

To answer your next question…

I have no idea why the MRIS hasn’t done anything about it yet. And there’s nothing about them something about it on the horizon either. It’s ashame because the MRIS makes millions of dollars (literally) every month from all the dues they collect from agents. Yet, they can’t make a few programming changes that would make everyone’s lives so much easier. Instead, they waste their (our) money on things such as Mr. IS without ever consulting us about it first.

Good and Bad News In The World Of Foreclosures

There’s good news and bad news in the national and local Loudoun County foreclosure world. You probably want to hear the bad news first, right? Ok, here goes…

Bad news

• Nationwide, foreclosure filings in June 2008 were up 53% over June 2007
• Economists project 2.5 million homes nationwide will enter the foreclosure process this year, up from 1.5 million in 2007
• Analysts say the mortgage industry’s effort to assist troubled borrowers is being overwhelmed by the magnitude of the foreclosure crisis

Good news

• Nationwide, foreclosure filings are down 3.4 percent in June over May
• The local Loudoun County foreclosure market has shown signs of stabilization over the past 6 months
• The new Virginia law that went into affect July 1 may help some financially-stressed Loudoun County homeowners moving forward

Yes, the bad news is pretty bad. But remember that the bad news is nationwide and that the Washington, DC metro area, including Loudoun County, is about 6 to 9 months ahead of the rest of the country.

Foreclosures/REO and Short-Sales Selling Like Hot Cakes

Sales of foreclosure/bank-owned and short-sale properties in Loudoun County are up…way up! So what’s "way up"? How about 378 percent!

As of a few weeks ago, distressed properties made up almost half of the total sales in Loudoun County. Investors and traditional buyers are out in full force taking advantage of the deals to be had.

Here are the numbers:

• The number of foreclosure/REO and short-sale properties that sold during the 2nd Qtr of ‘07 - 227
• The number of foreclosure/REO and short-sale properties that sold during the 2nd Qtr of ‘08 - 859
• That’s an increase of 378 percent

With the Loudoun County real estate market looking up and interest rates having jumped recently, this may be just the time to start picking up an investment property or two. And if you’re a traditional home buyer that doesn’t mind putting in some money and sweat equity into a great deal, you may want to check out some of those great deals.

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A Must Read For Loudoun County Real Estate Investors

See What Properties Are In Foreclosure For Free

If you’re curious about which properties in Loudoun County (or other parts of Northern VA) are in the foreclosure process, check out ForeclosurePoint. The site offers a database of about 1.2 million properties with foreclosure filings in 35 states including Virginia. Registered users (free) can check out street addresses and dates of foreclosure filings of properties in Loudoun County and the rest of the area as well.

If you’d like more detailed information, you can upgrade to a "Premium Membership" which runs $79.95 per month. That’s quite a chunk of change, but the upgrade provides all foreclosure details and access to their VeriTrack™ feature that monitors and updates changes to property status, auction schedules, and opening bids.

Though ForeclosurePoint offers information on properties going through the foreclosure process, it does not list properties that are now bank-owned and for sale. If you’d like to receive a list of bank-owned properties currently for sale, email or call me and I’ll get that over to you.

Loudoun County Top 10 Best Places To Buy Foreclosures

Forbes recently named the Washington, DC metro area including Loudoun County one of the top 10 best places to buy foreclosed homes. Part of the criteria was whether there were hints of stabilization, which is evident in the latest Loudoun County inventory/supply and buyer demand numbers.

"Our goal was to differentiate inexpensive foreclosure markets from those that are undervalued, as cheap foreclosures in flimsy markets don’t necessarily make strong investments."

Here’s are some of the figures Forbes came up with for the area:

• Median home price: $366,583
• Foreclosure savings: $56,858
• Foreclosure rate: 1.16%
• Price change 2006-2007: 0.77%

To check out how they came up with the rankings, click here.

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