Foreclosure red flags signal stress in local booming housing market

While the regional housing market is celebrating its best sales year in a decade there are distress red flags waving. Foreclosure starts increased 19.5% last year in the local NE TN markets. The local SW VA markets saw an 11% increase. The regional scorecard was a 12% increase.

The distress signals are cited in Attom Data Solution’s 2018 Year-End U.S. Foreclosure Market Report. Nationwide new foreclosure filings were down 8% from 2017. It also reports that foreclosure activity dropped to a 13-year low last year. Attom’s year-end report is based on publicly recorded and published foreclosure filing in more than 2,500 counties.

“Plummeting foreclosure completions combined with consistently falling foreclosure timelines in 2018 provide evidence that most of the distress from the last housing crisis has now been cleaned up,” said Todd Teta, chief product officer. “But there was also some evidence of distress gradually returning to the housing market in 2018, with foreclosure starts increasing from the previous year in more than one-third of all state and local housing markets.”

Local foreclosure starts spiked in 2015 then gradually declined until last year. Attom’s report shows 547 new filings in the local 12 markets.

The largest number of new filings come in the biggest county markets, but it’s noteworthy that Sullivan County, which led the region on increasing its market share of single-family resales last year, also saw a 22% increase in new filing. The Washington County Tenn. Market saw a 14% increase in new filings.

The only NE TN market that had fewer new foreclosure starts was Carter where they declined by one new start.

It’s also noteworthy that new filings declined in all the SW Va. Local markets with the exception of Washington County. It had a 34% increase.

Attom’s report says some of the distress was driven by natural disasters, but natural disasters do not explain the increase in such markets as NE TN and the largest SW VA market. So, what’s driving the stress on the housing market?

While the local economy continues to boom not all segments are performing at that rate. The recovery has been very good from some and not-so-good for others.

The region is at full employment but the creation of what’s referred to as “good jobs” is outnumbered by creation of low-pay jobs in the health care and service sectors.

According to the state Department of Labor and Workforce Development and Bureau of Labor Statistics (BLS) list of jobs that are in most demand in our labor market for every $50,000 and above new job the local economy creates four jobs that pay $30,000 or less. The benchmark for a family of three to attain and sustain a moderate lifestyle is almost $60,000.

Another factor is the number of individuals that live from payday-to-payday. They’re surviving, but any disruption in finances puts them is the stressed category.

Attom’s 2018 home equity report is a month out, but the Q3 report shows the number of seriously underwater mortgages has been increasing since Q3 2017. The increase accelerated during Q1 last year.