Foreclosure Filings in Thurston County

There is a good article in this morning’s Olympian about local foreclosures. The story highlights the rapid growth of foreclosures in our market over the past several years. Here is a link to the article.

http://www.theolympian.com/2010/02/25/1151116/foreclosures-spike-in-2009.html

The foreclosure filing numbers in 2009, while too high, are not as bad as the raw numbers reflect. Of the more than 1,400 Notice of Trustee Sales (or foreclosure filings), a couple a hundred were repeat filings. In other words, single property owners received multiple foreclosure filings.

The amount of these repeat filings was significantly higher in 2009 than in previous years. This shows that banks were both trying to: (1) work with borrowers to avoid foreclosure; and (2) avoid the loss recognition that happens after foreclosure. Therefore, the actual number of foreclosures was not nearly as high as the filings would suggest.

Still, the number of foreclosures is having an impact on the supply of homes available for sale. In Thurston County during January nearly one out of every four sales of existing homes was a bank owned property. One in three sales at $200,000 and under was bank owned. This excess supply in the market is having an impact on prices.

There is a lot of discussion about foreclosure properties’ impact on home prices around the country. Most of that discussion assumes that all home prices fall in lock-step with the fall in value on the foreclosed property. That is simply not the case. Foreclosures do impact market prices to the extent they inflate the supply of homes. This much is certain.

Click image to enlarge.

However, what is not discussed in the condition of foreclosed homes compared to non-foreclosed properties. Foreclosure homes are generally in rougher condition than their non-foreclosed counterparts. That condition reflects in the sales price of those homes. They quite rightly sell for less than better-conditioned non-foreclosure properties.

There is also much discussion about banks under pricing foreclosed properties and how that practice weighs on home prices overall. We cannot speak to the practices in other market areas, but we do not see much of that practice in our local market.

A review of bank-owned properties reveals similar market times to other well-priced homes in the area. This is an indication that the homes are priced to market. Were it otherwise, market times would be much lower and the homes would be receiving multiple offers. Again, the lower prices have more to do with condition than to the bank’s eagerness to sell.

Foreclosures are expected to remain well above normal levels throughout 2010. However, we are seeing a downward trend in the number of foreclosure filings. The chart below shows the downward trend line since last the first part of 2009. This is a trend we’re sure everyone wants to see continue.

Click image to enlarge.