Wednesday, November 10, 2004

Foreclosure rate 'scary'

Foreclosure rate 'scary'

Through October, metro area running 28.4% ahead of 2003

By John Rebchook, Rocky Mountain News
November 10, 2004

Almost 10,000 metro-area real estate foreclosures have been filed in the first 10 months of this year, eclipsing last year's tally.

And only a technicality prevented that number from exceeding 10,000. That's because at least two counties - Denver and Arapahoe - decided not to hold foreclosure sales during the week before Christmas.

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Under the law, when a foreclosure is opened, the public trustee office must have a sale within 45 to 50 days. That timing would force counties to have foreclosure sales in the third week of December, just before Christmas.

"We thought it would be unseemly to hold a foreclosure sale on Christmas week," said Mary Wenke, Arapahoe County's public trustee.

"So that really means we only opened three weeks worth of foreclosures in October," she said. Wenke estimated that 180 or so foreclosures in October weren't opened.

Denver also didn't open all of its foreclosures in October.

That means in late December an extra 140 or so foreclosures will be sold that normally would have been sold Dec. 21, said Anita Dubas, acting chief public trustee for Denver.

But even without every foreclosure being counted, 9,930 foreclosures were opened through October, 28.4 percent more than the 7,731 in the first 10 months of 2003.

"That's scary, really scary," Dubas said.

In all of 2003, 9,431 foreclosures were filed in Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson counties. That was a 43.5 percent increase from 2002, when 6,574 homes went into foreclosure.

Last year's foreclosures were surpassed only by the 17,122 foreclosures filed in 1988. Foreclosures last year accounted for about 1 percent of the homes on the market, compared with 2.3 percent of the housing stock in 1988.

"I don't think this is a surprise," said economist Tucker Hart Adams. "People were encouraged by extremely low mortgage rates and extremely innovative mortgage products to buy homes, buy bigger homes and get out of apartments into homes for the first time. Many of these people, if they miss only one or two paychecks, are not being able to make their mortgage payment."

If, as expected, interest rates continue to rise, that could accelerate foreclosures, she said.

"Traditionally, 75 percent of the mortgages were fixed and 25 percent were floating, but I hear that last year that maybe 60 percent to 70 percent of the loans were floating," she said.

And because foreclosures are a lagging indicator, even if the economy picks up next year, foreclosures could continue to rise, she said.

Dubas said she has seen homes priced in the $40,000s to small commercial properties with $1 million or more in loans go under.

"I would guess the average price is in the $150,000 to $200,000 range," she said. Parts of Denver with large minority populations, such as northwest, northeast and southwest, appear to have the most foreclosures, she said. She estimated 70 percent to 80 percent of the foreclosures are for homes, with the rest being commercial properties.

Independent broker Gary Bauer said a client of his recently looked to buy a house that was just heading into foreclosure in the Inspiration Point neighborhood in northwest Denver.

The buyer paid about $150,000 for the home two years ago, but then refinanced about every six months, until he had about $210,000 in debt on it.

"With a $210,000 mortgage, it is clearly upside down," Bauer said.

Bauer's client's offer of $155,000 was rejected.

"My guess is the bank is going to end up selling it in the $160,000s," Bauer said.

Foreclosures climb

County Oct. 04 Oct. 03 YTD '04 YTD '03

Adams 174 157 2,019 1,488
Arapahoe 180 219 2,458 1,869
Boulder 43 40 426 408
Broomfield 9 9 108 90
Denver 267 434 2,707 2,120
Douglas 50 48 665 535
Jefferson 121 110 1,547 1,221
Total 844 1,017 9,930 7,731

Sources: Public trustee offices from each county

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