Foreclosure postings up; home values increase

Two recent residential foreclosure reports show seemingly contradictory data – one reporting the Dallas-Fort Worth area with the highest level of foreclosure postings in the last two decades and the other showing the Metroplex with ever-increasing home values. 

But local experts say the data isnÂ’t contradictory at all.

The latest report by Addison-based Foreclosure Listing Service showed the number of Dallas-Fort Worth foreclosure filings for the first half of 2009 is up 14 percent from the same period last year.

Almost 30,000 residential foreclosure notices for the Dallas-Fort Worth area have been recorded so far this year, Foreclosure Listing Service (FLS) reports, which is the highest level of foreclosure postings George Roddy Sr., president of FLS, has seen since he began tracking the numbers in 1990.

Real estate analysts have been anticipating a surge in foreclosure postings after several lenders declared temporary moratoriums on taking borrowersÂ’ homes beginning in November 2008 and ending in April 2009.

Roddy said the homes that would have been foreclosed during the various moratoriums were posted for foreclosure, but not foreclosed so they were simply added to the next monthÂ’s foreclosure posting numbers. Roddy said about 25 percent of postings in each month were carried over from a previous month.

“So the numbers we’re looking at are actually not as bad as they indicate, but certainly the numbers are high enough even without the re-postings that it’s not a healthy situation,” Roddy said. “… These are bad numbers; these are record-setting numbers.”

But Sam Khater, senior economist at First American CoreLogic, said itÂ’s not all about the foreclosures.

Khater said a more telling number tracked by his foreclosure and mortgage delinquency activity research firm is mortgage delinquencies, which also have increased in the Fort Worth-Arlington market. In March, 4.4 percent of mortgage loans were 90 days or more delinquent compared to 3.6 percent for the same period a year earlier.

Public record foreclosure filings include the three steps in the foreclosure process beginning with the pre-foreclosure filing or Notice of Default (NOD), which typically occurs after the 90-day delinquency period, the Notice of Foreclosure Sale when the property is scheduled for auction; and the Notification of Sale filed after the property is sold at auction. If the property isn't sold at auction, it goes back to the lender and is considered Real Estate Owned (REO).

Roddy said it can be surprising for homeowners, then, who learn their homes are actually appreciating in value.

The recent CoreLogic report showed Texas home values increased 1.4 percent in March 2009 compared to March 2008. And thatÂ’s a far cry from the national home value decline of 11.5 percent.

Khater said his firm is expecting national home prices to bottom out in late 2010, and Texas might see some of  those devaluations, but not to the same degree. On average, a market can withstand up to a 5 percent drop in home values without an impact to its transaction performance, Khater said.

“I wouldn’t be surprised if [Texas home values] dropped some from where they are now, but Texas has tended to remain more along with its fundamentals during this last national [housing] boom so if there is more of a decline, Texas won’t decline much.”

Much of the confusion regarding foreclosures and mixed residential reports in Dallas-Fort Worth can be attributed to foreclosures themselves being a lagging indicator, Roddy said. While foreclosures donÂ’t necessarily indicate a current loss of value, devaluation can occur as the foreclosed properties are put back on the market.

“Foreclosure is a lagging economic indicator – it catches up with you and catches you on the fanny,” Roddy said. “The foreclosures really started to pick up in D-FW in 1999 and 2000 after the dot-com bust, so you have to remember that we’ve been going through this a lot longer than other markets in the U.S. and they’ve been spread out over time.”

Another key factor is the majority of local foreclosures are spread out geographically, Roddy said. The only time foreclosures have an immediate impact on home values is when there are several in a small geographic area such as certain sub-divisions where foreclosures might out-number armÂ’s length sales, or regular market sales. And in that case, Roddy said values begin to take a hit from a psychological stand-point.

“There are certainly areas that have been impacted more than others simply because there are more foreclosures than sales and it’s a psychological thing. If somebody puts their house on the market and sees there have been a lot of foreclosures in their area, then they will ask less for their house because they think it must be worth less – and it’s almost a self-fulfilling prophecy.”