Local Foreclosures Still on the Rise

Hmm, odd. The pace of foreclosures in the Seattle area seems to still be increasing.

The nationwide foreclosure surge continued in March, with the Seattle area following along at a lesser rate, according to a new report Monday.

The number of properties with foreclosure filings nationwide rose 57 percent in March from a year earlier and 5 percent from February, according to RealtyTrac, an Irvine, Calif., company that tracks foreclosures.

For King County, RealtyTrac reported 527 total foreclosure filings in March, up 31 percent from a year earlier and 7 percent from February.

The county had one filing for every 1,525 households, compared with one in every 528 households nationwide. The Seattle area, which RealtyTrac considers as King and Snohomish counties, had one filing per 1,423 households in February, putting it 167th out of 229 metropolitan areas; it was in 166th place in February and 173rd in January.

That’s still pretty far down on the list, which is to be expected since home price stagnation/deflation is only just getting started around here, and that seems to be what has really been driving foreclosures in other areas.

Meanwhile, foreclosures in Snohomish County were actually slightly lower than a year ago.

While foreclosures are rising in many areas of the country, the number of Snohomish County homeowners in jeopardy of losing their homes actually went down last month, according to RealtyTrac Inc.

In March, foreclosure filings were issued for 228 properties across the county. That translates a foreclosure rate of one out of every 1,187 households. That was down 3 percent from February and was 8 percent lower than the rate a year ago.

Unfortunately I have yet to locate any resource for historical foreclosure information, so we don’t have much to compare this with outside of these news reports.

(Aubrey Cohen, Seattle P-I, 04.15.2008)
(Eric Fetters, Everett Herald, 04.15.2008)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

47 comments:

  1. 1
    Lander says:

    Tim-
    It only goes back to January 2006, but foreclosures.com does have some foreclosure stats by county.

    http://www.foreclosures.com/stats/

    Snohomish County Pre-foreclosures
    March 06: 166
    March 07: 156
    March 08: 254

    Snohomish County REOs
    March 06: 31
    March 07: 37
    March 08: 65

  2. 2

    REAL ESTATE VULTURES

    The patient vulture waits in the Seattle Tree near the courthouse auctions; just knowing there will be more and more fat cats dropping; with more delicious ones to choose from too, very soon….

    The crafty vulture thinks it out too, if I gorge myself on these skinny bony ones now, I’ll miss the real filet mignon later….no, just be patient and wait.

  3. 3

    I’ve been to a bunch of the foreclosure auctions, and at this point didn’t see any real deals, just a bunch of idiots bidding like crazy for properties so they could pay more than the house is worth….Dim witted vultures, maybe?

  4. 4
    newbie says:

    Seattle isnt the best spot for forclosures right now. I know a guy who just bought a 3 bed room house in a major city in the us for 104k and already has it rented out for 1k a month.

    Im starting to see lots of articles popup about the benefit of giving the keys back to the bank. I think there will be a huge rise in forclosures in 6 months once banks can process all these houses.

  5. 5
    Nolaguy says:

    New bubble term: Seattle Equity Locusts

    After record price drops in California, Seattle’s median is now higher than LA county. 450k vs 440k:

    http://latimesblogs.latimes.com/laland/2008/04/rewind-socal-ho.html

  6. 6
    Ray Pepper says:

    Newbie you are dead on! The foreclosure spike across the nation has just begun. On my travels through Az, Ca, and Nv it is just plain to see how upside down people are in there homes. In Reno homes bought for 750k, 590k, and 440k are now 490k, 400k, and 280k respectively and they continue to sit.

    The blood bath is just horrendous. Many will continue to pay as agreed but with more and more of these articles coming out educating people to stay current on their payments but buy a new home and “walk away” from their old, the carnage will continue.

    All these new homes sitting and selling for 30-50% off highs makes it very difficult for a homeowner to NOT walk away. 2 friends I know have already done it. Their same 3000 sq foot homes which they owed 495k on they payed current. Bought the same NEW home 2 streets away for 320k as a rental on paper. When it closed they moved all their furniture and belongings into the rental and now they own a brand new home and have much less debt, considerably lower payments, less stress, and a Foreclosure.

    I have been told this Foreclosure is easily explained away as well but as they told me. Ray, we don’t need anything. We have a Brand new home, cars, and jobs.

    So there you have it. Many years of this type of behavior is what we have to look forward to. Right or wrong they are my friends and I have not lived in their shoes and will NOT judge. But, I understand it.

    http://www.500Realty.net

  7. 7

    Ray-

    This weekend I was looking at foreclosures in Las Vegas on hotpads.com. AH-MAY-ZING! The place is loaded with foreclosures. It’s like a war zone.

    Seattle has it’s bad spots, especially south Seattle. But at least Seattle ain’t no Tacoma.

  8. 8

    Hmm, I can buy a condo in South Beach for 250k, but I cant buy a decent condo in sh*tty, rainy ass Seattle for that much. In fact condo prices are up almost double in just five years. The only reason Seattle is popular is because other American cities are such toilets. Look at Tacoma, prices are screaming back downward there. The weather for the last 7 months has been appalling. Just when you think you’re gonna get some sun, it turns around on you. This place is so overrated. Even Ewa is better, minus the yokel aspect of it. I’d say Pheonix is cool, if you can stand the driving, random violence, and anvil of hell for four months.

  9. 9
    Buceri says:

    On NPR they had a piece where an expert said foreclosures will probably peak (nationwide) in the last quarter of this year.

    Most of the last of the bad mortgages are resetting in the next 3 months (vintage summer ’05 and ’06) and then the sales/foreclosures/leave the keys at the bank, will hit from September on. Many will struggle and will keep making payments as long as they can (maybe into 2009). This does not equal “the bottom”; all these people are black listed for 7 years and the inventory will be huge for years to come.

    On a related note, credit cards are reporting record late payments. And most of the charges on cards are gas and groceries.

    What we are going through is unprecedented. Early ’80s Fed Chief Paul Volcker came out of retirement to say the U.S. faces ‘huge imbalances and risks’. And Alan Greenspan goes on tour to say “hey, don’t blame me!!!”.

    Very uncertain times…

  10. 10
    david losh says:

    When I have gotten a sub-prime loan the underwriter has asked for some proof that my no income verifier loan had merit. They have asked for a copy of my business license, bank statements, copies of yellow page ads, or equity in other properties. I’ve pledged more than one property to a loan. I have a short sale on my desk that’s clearly a case of Real Estate agent colluding with a Loan Originator to commit fraud.
    The reason I came here today was to ask you guys what happened to the system that it allowed a woman who is a bus person in a restaurant to get a no income verifier loan. The underwriter is supposed to protect the investors. How or why would so many bad loans get past underwriting? What’s the reasoning or dynamic?
    You guys have given me great information, so I’ve come to respect your opinions.

    Then the unfortunate pepper comment:

    2 friends I know have already done it. Their same 3000 sq foot homes which they owed 495k on they payed current. Bought the same NEW home 2 streets away for 320k as a rental on paper. When it closed they moved all their furniture and belongings into the rental and now they own a brand new home and have much less debt, considerably lower payments, less stress, and a Foreclosure.

    This is fraud. It’s actionable and I would hope my government would jail these people for fraud. These comment seem to be made as though these people did a smart thing. In my opinion that would be promoting criminal activity. That’s illegal.

  11. 11

    There’s been a lot of skirting the law in real estate in recent years..Maybe not outright illegal fraud all the time, but a lot of cases where it’s “nod nod wink wink” and somebody is being deceived, whether it’s the lender, the buyer, the government, etc.
    And I don’t think there was any segment of the industry that wasn’t a part of it. Lenders, agents, appraisers, underwriters, even some title/escrow shenanigans.
    So I’m thinking that as a whole, the Real Estate pros who post on here are less inclined to engage in fraudulent behavior. I may disagree with them on a lot of issues, and we may differ greatly in style, but I think the rampant sleaze factor in the industry has given all of us a black eye.

  12. 12
    Alan says:

    David Losh,

    I think that the packaging of mortages into securities created a risk-assessment-firewall in the mortgage lending industry. The people creating and selling the loans did not have the proper incentives to evaluate risk. The people buying the loans were trusting the people who were estimating the risk because large returns can create blindness. It almost seems like a classic confidence game.

    What laws did your friends violate when then walked away from their house?

  13. 13

    I HEARD ON THE RADIO WASHINGTON STATE LOST 3200 JOBS LAST MONTH

    Bear in mind though, the job tracking excludes most of the real estate losses:

    http://www.financialsense.com/fsu/editorials/2008/0408.html States in part:

    “..According to Paul Kasriel and Asha Bangalore of Northern Trust, APX. 43% Of jobs created during the “Boom” were Real Estate related (Financial professionals of all stripes and huge numbers, realtors, appraisers, self employed contractors, appliance/ carpet/ window/ door/ concrete/ frame/ roofing manufacturers, sales people and installers, architects, landscape architects etc, etc.) What many of these people have in common is that they were self employed and independent contractors (Do not show up in unemployment data)…”

    I also heard unemployment statistics excludes laid off undocumented immigrants too.

    I heard on the radio that Washington’s phony minimized unemployment rate still rose a horrifying 0.4%…..

    WAMU is butcher axing all it mortgage workers and its stock lost 70%.

    It will take about 6-18 months before this cow manure hits the foreclosure fan bargain lists. Be a patient vulture, the real bargains are coming sooner or later.

  14. 14
    TJ_98370 says:

    “We are looking at the worst set of macroeconomic conditions since the Great Depression. I don’t know where the bottom is… The most dangerous part in my judgment is what is going on in the housing world, where we’re now running foreclosures at the rate of two million a year, where nine million homes, according to the government, just slightly under nine million homes, have either no equity in them or negative equity. That will go up to 15 million if housing prices continue to go down this year as they’ve done last year.”

    Mort Zuckerman, co-founder of Boston Properties, quoted by Bloomberg, March 12, 2008

  15. 15
    jon says:

    ” (Do not show up in unemployment data)…”

    They’re not eligible for unemployment benefits, but when Labor Dept. does its survey, they will still show up if they are looking for work.

  16. 16
    Buceri says:

    Jon – they don’t answer to surveys either. The undocumented are here to work; when work dries up, they move on. They are not relevant to employment or unemployment figures.

  17. 17
    jon says:

    I was referring to the suggestion that previously self-employed people don’t show up in unemployment statistics. Illegals are a different matter.

    “Bought the same NEW home 2 streets away for 320k as a rental on paper”

    How does someone who is underwater on one mortgage get another mortgage? Have the underwriters learned absolutely nothing from this mess? I’m more inclined to think these stories are urban legends.

  18. 18
    Sniglet says:

    The patient vulture waits in the Seattle Tree near the courthouse auctions; just knowing there will be more and more fat cats dropping; with more delicious ones to choose from too, very soon

    The courthouse foreclosure auctions are likely the LAST place good deals will be found. When the homes are worth less than the mortgage the bank just buys them back at the courthouse. It’s at this point, once the place is real-estate-owned, that buyers can start trying to negiotiate and get a good deal. Hanging out at the courthouse is pretty much pointless.

  19. 19
    Sniglet says:

    Seattle has it’s bad spots, especially south Seattle. But at least Seattle ain’t no Tacoma.

    Patience… Seattle is just behind the curve. Give it another 2 years and the foreclosures in King County will be piling up like we’ve never seen…

  20. 20

    We are nowhere near the end of the rise foreclosures in this area. As the economy continues to worsen, more families will be facing financial distress.

    Lots of ARMs resetting not only this year but well into 2009. We didn’t really slow down the horrifying lending standards that david losh mentions until we were well into the fall of 2007.

    financial distress + no equity = rise in defaults.

    Received a call this morning from an agent on the eastside, russian accent. “What is short sale. What is deed in lieu?” She wants to know how to learn about these things. I tell her to come to Friday’s class. She says she wants to know if I can answer her seller’s questions. Well, I told her she can bring her seller to the class with her. She says, “You don’t understand, I have many sellers.”

    On the eastside…

    Any home seller reading this blog, our state has FREE housing counseling available to homeowners in financial distress. Our tax dollars are paying for this. Please take advantage of this.

    http://www.dfi.wa.gov/consumers/homeownership/

  21. 21
    Happy Renter says:

    I love my apartment but y’all make me so anxious to buy a house when the bottom falls out and all these foreclosures start up.

    I already get 500+ results on my favorite redfin search, which didn’t happen a couple of months ago.

    I think this has a long way to go but it just makes me all anxious to be a real estate vulture in a year or two.

  22. 22
    Dave says:

    Hmmm…. maybe I will pick up a house when the market hits bottom. Move into the better house and rent out my current since rentals will eb in greater demand.

    Interesting idea.. buy low when everyone else is getting out of the market.

    Maybe it will make up for me buying in July ’07.

    Interesting….

    Dave

  23. 23
    Bits_of_Real_Panther says:

    “The only reason Seattle is popular is because other American cities are such toilets” There is some truth in this, and I don’t think it’s a small factor in the relative changes among cities in the pricing of real estate in recent years. Seattle is cleaner and safer than other major hubs. As to your other point, winter weather in the PNW is cyclical, we’re about due for a run of mild dark seasons

  24. 24
    Ubersalad says:

    @david losh – I would like to respond to your daily rambling, but it’s difficult because I don’t think you even know what you are saying.

    Anyhow, No Doc loan was designed for those that do not have the income and asset document to support the mortgage, which meets the woman you are describing. No Doc loan is pure garbage, but if you’re to offer it, it should never be offered by Subprime lender or to anyone without sufficient credit history. It makes no sense to lend someone with bad credit history and no income or asset statement. If you can find a lender to do it without 50% down payment (World Savings would used to do just about any loan given 50% down payment), then all the power to you.

  25. 25
    Sniglet says:

    I love my apartment but y’all make me so anxious to buy a house when the bottom falls out and all these foreclosures start up.

    Don’t worry… When we hit bottom, buying will be the LAST thing on anyone’s mind. Sure, the cost of owning will be much more in-line with rent at the bottom, but rents will be even cheaper than they are now, so renters don’t exactly lose out.

    Over the next 20 years I suspect that a renter who religiously invests his savings in bonds will do every bit as well as someone who buys at the bottom and plows their savings into the mortgage.

  26. 26
    Buceri says:

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    Maxwell forecasts $180 oil by 2015, and $300 a barrel by 2020. And at those prices, could rationing be far off in the future? Plus, check in with Tech Ticker later to get Maxwell’s take on smart oil investing plays as oil reaches the bottom of the barrel.

  27. 27
    Ray Pepper says:

    David Losh don’t judge until you have lived in others shoes. I do NOT judge my friends. They signed on both loans in good faith. They have families to raise, and with me, its always family 1st. Their 1st obligation is to raise their family and that takes precedent over everything else.

    My friends walking from house 1 into house 2 is widely evident in areas in Az, Nv, FL, and Ca. Its in the press and on the news daily. The system is broken and will take years to correct itself.

    Educate yourself first on what has happened then pass judgement. Travel my friend and you will see what I have touched. We have been very sheltered up here in Washington.

    Ray Pepper
    Broker
    http://www.500Realty.net

  28. 28
    TJ_98370 says:

    From our favorite local newspaper ……………..

    Are foreclosures a buy?

  29. 29
    Markor says:

    This is fraud. It’s actionable and I would hope my government would jail these people for fraud. These comment seem to be made as though these people did a smart thing. In my opinion that would be promoting criminal activity. That’s illegal.

    IMO over half the people in this country are criminals of the worst kind: murder & torture. Just today I read about hedge fund managers getting $billion salaries. (Yes, that’s a “b”.) Now if they generated billions in bona fide profits, that might be okay, but odds are that the gov’t (i.e. future taxpayers) will be funding a large part of that $billion. The bottom line is, at some point there’s a fine line between an honest person and a sucker. I don’t blame anyone who walks away from their house, even if other honest people suffer for it (including me).

  30. 30
    Mikal says:

    Sniglet, Rents are not going to go down. They have been artificially low because so many have bought instead of rented. This was the highest percentage ever to own. There are less apartments because so many apartments have been converted to condos. There are some new apartments going up, but not nearly enough for the demand as more move here for jobs and others have moved to renting. Even with the housing meltdown rents here are supposed to rise by 15% over the next 5 years. A 2 bedroom apartment that was getting $850 two years ago now gets $1200. Maybe these numbers are off some, but how would you think that rents will drop?

  31. 31
    Markor says:

    One downward pressure on rents will be unsold condos converting to apartments. I wouldn’t be surprised if rents increase in the near term though. As far as I can tell, rents fell significantly in Florida.

  32. 32
    b says:

    Mikal –

    Rents in every area that is further in the bubble-popping than Seattle have fallen. Why? Because rents have been artificially high recently, the destruction of rental units has far outpaced the amount of people changing from rent to ownership. And it was not just condo conversions, but many many rental homes went up for sale when the investors saw the profits they could rake in. Now that the bubble has burst, expect to see the market flooded with rentals. Condo conversions will deconvert if they havent sold enough units, regular condo towers going in right now are full of investors who never planned on moving into the unit at all but just flipping it, investors who kicked out their renters to sell will welcome them back, new landlords are created by people who cannot sell their house when they move/upgrade/etc.

  33. 33
    Sniglet says:

    Rents are not going to go down. They have been artificially low because so many have bought instead of rented

    As b mentioned earlier, Seattle area rents will undoubedtly fall as we catch up to the housing downturn. Once all the investors of condos or single family homes start realizing that no sale is going to happen anytime soon, they will rush to rent in order to staunch the bleeding. And once the foreclosures really get into gear, we will start to see old fashioned investor types start buying REOs as rentals.

    This is EXACTLY what is happening in other declining bubble areas in the country. It’s no surprise that rents haven’t started to fall here yet since we haven’t seen a significant decline in house prices, or a massive rise in REOs yet. Just give it another couple years.

    Hey, Miami and San Diego saw their rents rise substantially right at their bubble peak as well. But just look at them now…

  34. 34
    FreedomLover says:

    b – what do you mean by “destruction of rental units”?

  35. 35
    Mikal says:

    The only market even remotely similar to our is San Francisco. Compare the rates to that. They are already over a year into the bust and their rates are expected to go up 9% over the next 2 years. Miami and San Deigo are nothing like our maket. I’m talking about jobs.

  36. 36
    Sniglet says:

    Miami and San Deigo are nothing like our maket

    Huh? San Diego has always been lauded for having a great job market, with tech and bio-tech. In fact, they blow us away with bio-tech. They also outclass us on tourism. San Diego even has very stringent building laws, making it difficult to have a lot of expansion, just like us…

  37. 37

    At the moment, rents are rising as home prices are falling. If the economy continues to slide, I can’t imagine that rents will continue to rise. But….
    rents and sale prices have a historical relationship…over the last 35 years or so the average sale price is something like 200x the average rent, but right now it’s about 320x.
    And that’s been one of the arguments of why Seattle home prices are overvalued and will likely decline, because sooner or later there will be a reversion to the mean.
    So if rents are falling and home sale prices are falling, how is this reversion to the mean going to happen, or is it?
    Can it simply happen by sale prices falling by larger amounts than rentals falling?

  38. 38
    b says:

    Mikal –

    Seattle’s rental market is nowhere near that of SF. Compare the density of the cities and you would need to triple Seattle’s population before it was comparable.

  39. 39
    Sniglet says:

    Can it simply happen by sale prices falling by larger amounts than rentals falling?

    You nailed it on the head. This is exactly what’s been happening in other declining markets (e.g. San Diego, Miami, etc). rents have been falling but the cost of buying the actual property has been falling by even greater degrees.

    I’ve been reading stories about owners of existing apartment buildings being driven to discounting since they are facing so much competition from speculators of single family homes who are now renting them out since they can’t get the sales prices they need to cover the mortgage.

  40. 40
    b says:

    FreedomLover –

    Apartment -> Condo conversions, developers building condos instead of building apartment communities and investors who were selling their rental house/duplex/quad/etc to cash in on the bubble madness.

  41. 41
    david losh says:

    Anyhow, No Doc loan was designed for those that do not have the income and asset document to support the mortgage, which meets the woman you are describing. No Doc loan is pure garbage, but if you’re to offer it, it should never be offered by Subprime lender or to anyone without sufficient credit history. It makes no sense to lend someone with bad credit history and no income or asset statement. If you can find a lender to do it without 50% down payment (World Savings would used to do just about any loan given 50% down payment), then all the power to you.

    Sorry, what’s not to understand? I have no income, no credit, no money, and I buy houses. I usually have to show a business license, yellow page ad, bank statements, or other security for a no doc.
    Lenders make loans that make sense to them. In this arena I’m considered a fair return on a dollar because I will buy the property and sell it for a profit or loss. In the case that I quoted she has no where with all, and that’s the term used.
    I do know what I’m talking about, but that’s a sad thing. In the blogosphere today there is a lot of very, very bad information so, I don’t take offense.

    The courthouse foreclosure auctions are likely the LAST place good deals will be found. When the homes are worth less than the mortgage the bank just buys them back at the courthouse. It’s at this point, once the place is real-estate-owned, that buyers can start trying to negiotiate and get a good deal. Hanging out at the courthouse is pretty much pointless.

    This is really the truest set of statements I have read on a blog in months.

    pepper, it’s fraud. Just because everybody else is doing it does not make it different. If everybody on the corner is selling crack that does not make it any less illegal. Educate yourself.

  42. 42
    david losh says:

    Oh yeah, I wanted to put the family pepper comment on a separate line. Many a crack dealer are just feeding the family. In those cases they should get the same sympathy your suburban family gets.

  43. 43
    Ray Pepper says:

    HMMMM. Hold back Ray. Hold back………..I must comment that this blog is entertaining. Some of the characters here I actually seek out to read what they have to say.

    Only for titillation though. Never any knowledge gained just pure entertainment.

    Not everybody is walking from homes David. Some are, and the vast majority are not. ..YET………. But, as a famous CEO stated 3 months ago:

    ” If the masses continue to suffer home depreciation the home owner will leave their homes in much higher numbers, realizing the cost of renting is far better , and that will collapse our capital markets . Our entire economy will suffer unprecedented declines.”

    So now we bank on Bernanke. As I said before if he pulls us out of this mess over the next 5 years I will place a poster of him in my office.

    Ray Pepper
    http://www.500Realty.net

  44. 44

    We may pull out of this mess within the next five years despite Bernanke, not necessarily because of him.
    I knew a woman a few years back who had a picture of Alan Greenspan on her refrigerator. As a result she lost 20 pounds.

  45. 45
    TJ_98370 says:

    I knew a woman a few years back who had a picture of Alan Greenspan on her refrigerator. As a result she lost 20 pounds.

    Good one Ira. Gag reflex I’m assuming……..

  46. 46
    david losh says:

    I agree it’s all entertainment until some one gets hurt.

    My original question was what happened to the underwriter in the loan process. The underwriter is supposed to be the firewall. How did they allow loans without any due diligence, checks, or balances? What was the dynamic or motivation to produce non performing loans?

  47. 47

    David,
    You’re totally right about the underwriter being the firewall, but weren’t appraisers also supposed to report actual value? How many appraisers have been pressured by lenders to come up with something higher? It makes little sense, but has been extremely common.

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