Tri-Cities foreclosure filings up sharply; why that’s not bad news

Tri-Cities properties with new foreclosure filings in the third quarter total 285, up 228.6% from Q3 last year. That slightly below the Tennessee increase of  228.9%. Nationwide filings were up 3.8 from last year.

That update is part of a recently released  RealtyTrac Q3 Foreclosure Report and the news isn’t necessarily a bad thing for the Tri-Cities.

Total filings

Total new Tri-Cities filings

“The widespread rise in foreclosure activity in the third quarter compared to a year ago is the result of two starkly different trends taking place,” said Daren Blomquist, vice president at RealtyTrac. “In states such as New Jersey, Massachusetts, and New York, a flood of deferred distress from the last housing crisis is finally spilling over the legislative and legal dams that have held back some foreclosure activity for years. That deferred distress often represents properties with deferred maintenance that will sell at more deeply discounted prices, creating a drag on overall home values. On the other hand, in states such as Texas, Michigan and Washington, the third quarter increases are a sign that the foreclosure market has settled into a normalized pattern close to or even below pre-crisis levels, and in those states the overall housing market should easily absorb the additional foreclosure activity with little impact on home values.”

ReoSince Tennessee is a non-judicial state the latter new filings trend explanation applies to the local situation. Currently both the Kingsport-Bristol and Johnson City MSAs have foreclosure and delinquent mortgage rates that are at or slightly below pre-recession levels.

“It’s no surprise that foreclosure activity is up from a year ago as banks slowly, but surely, work their way through their pipeline of foreclosed inventory. It’s really nothing more than housekeeping on the part of the banks and not a cause for concern,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “In fact, given the dire shortage of homes for sale, I actually see an increase in foreclosures as a positive as it will, in a small way, help with meeting the substantial pent-up demand that we have for housing in the Seattle market.”

NTSWhile the local inventory is not as tight as Seattle, that’s a pretty good picture of the local existing home market

The Northeast Tennessee Associations of Realtors’ reported September was the fifth straight month of record-level existing home sales.  That sales pace has reduced the inventory of homes on the market. NETAR President Sharon Duncan said  September’s overall listings were 8.5% lower than they were September last year and 10.2% lower in the $200,000 and below price range, which accounts for a little over 60% of all area home sales.

Although the percent of increase for Kingsport-Bristol MSA and Greene County are big numbers the actual number of new foreclosures moving into the pipeline shouldn’t put much downward pressure on prices of other properties as long as they are gradually introduced into the market.

The largest increase in total Q3 filings are in Sullivan and Hawkins counties.  Both those counties posted triple digit increases from Q3 last year while the Johnson City metro area of Washington, Carter and Unicoi counties saw double digit increases. Greene County also saw a triple digit increase.

Report methodology

The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing entered into the RealtyTrac database during the quarter — broken out by type of filing. Some foreclosure filings entered into the database during the quarter may have been recorded in previous quarters. RealtyTrac’s report incorporates documents filed in all three phases of foreclosure: DefaultNotice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee’s Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). The report does not count a property again if it receives the same type of foreclosure filing multiple times within the estimated foreclosure timeframe for the state where the property is located.

Special methodology note on REOs

In the first quarter of 2015, RealtyTrac started receiving REO data from a new source that provides the data more quickly in some cases than other sources. This new source may be resulting in some REOs reported by RealtyTrac in the first six months of 2015 that would have been reported in subsequent months using other sources. As always, if RealtyTrac receives an REO filing (or any other foreclosure filing type) on the same property from multiple sources, or from the same source multiple times, that REO filing is only counted in the RealtyTrac U.S. Foreclosure Market Report the first time it is received.

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