The Home Price Index, as tracked by the Federal Housing Finance Agency, fell 3.9 percent between the fourth quarters of 2009 and 2010, representing an average price change in single family homes across the country. Among the leading causes for this is increased foreclosures.
Although foreclosure growth nationwide was slower in 2010 than the year before, it still rose 1.67 percent from all foreclosure filings in 2009 as reported by RealtyTrac. The change from 2008 to year-end 2010 was a staggering 23.23 percent. In 2010, nearly 26 percent of all U.S. residential sales were foreclosure properties.
"Foreclosures continue to represent a substantial percentage of all U.S. residential sales and continue to sell at an average sales price that is significantly below the average sales price of properties not in foreclosure -- the result of a bloated supply of foreclosures and weak demand from homebuyers," said James Saccacio, chief executive officer of RealtyTrac. "The catch-22 for 2011 is that, while accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices."
Local real estate professional Bill Cook tracks local foreclosure statistics. According to data he collected through 2010, Bartow County foreclosures flirted monthly with record numbers, including a new high set in September with 129 properties cried on the courthouse steps. Of the 1,014 properties auctioned at the courthouse, only 27 were sold with most going back to the lender while others were shorted.
"Property values fell in 2010. They're going to fall again in 2011 because we're going to have an increase in foreclosures in 2011, more than we had in 2010," Cook said. "We saw property values fall from 2009 and we saw '09 values fall from 2008, we saw '08 values fall from 2007, and the bubble popped somewhere around July 2006. That's when all of a sudden someone said, 'The king isn't wearing any clothes. There's a problem here.'"
Working as a team, Bill and wife Kim Cook scour the local foreclosure market every month personally speaking to homeowners facing foreclosure. The Cooks also participate in the monthly foreclosure auctions.
"Kim and I are about the only ones who drive around, look at the properties and knock on the doors of people who are in foreclosure. We don't knock on everybody's door, just a lot of them, and the reason we do that is a lot of time you have people in these homes and they don't have a clue what's happening," Bill Cook said. "A lot of these are families and it's due to a layoff or a bad mortgage or whatever happened."
Increasing foreclosure levels have continued due to a number of challenges, most recently with lenders cutting corners in an effort to process the high volume of filings received. Shady practices in the filing process garnered the name "robo-signers" in which mortgage companies used a single source to sign off on thousands of foreclosures a day.
As regulators put an end to such practices, a new problem arises, said Bill Cook, warning of the foreclosure overflow leaving homes sitting vacant for extended periods of time. Called "shadow inventory," bank-owned homes may sit empty sometimes before foreclosure documents are even filed. This backlog will have to be cleared before property values can again rise, which may take as long as two years due to the saturation of the market, Cook said.
"Nothing's going to happen to property values until you get rid of shadow inventory, and then once you get rid of it, the lender gets caught up on all the people they're not foreclosing on. They get them foreclosed on and then get those properties sold, and once you get that worked through the system, property values can start going back up again but you're looking at another two years maybe," he said.
On the horizon lies another problem that has yet to present itself, according to Cook. This challenge to the fledgling home market is the Alt-A and Option ARM mortgage, which have begun resetting resulting in higher payments. Thus, another wave of foreclosures may be on its way, adding stress to the flooded market.
For more information on Bill and Kim Cook, visit www.reioutpost.com or read their regular column each Sunday in The Daily Tribune News.