Tri-Cities foreclosure backlog building

There’s a backlog of Tri-Cities foreclosures building up. It shouldn’t be anything like the wave of foreclosures during the Great Recession. But the red flags are waving.

There’s also no way to predict how big the national – or local –  backlog will be until after the government’s COVID-19 housing measures expire, according to Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. That also goes for the local backlog.

An increase in foreclosures could drive down prices and existing home sales by increasing the inventory of homes for sales. Currently, that inventory is at an all-time low.

Sharga’s observation was part of ATTOM’s 2020 year-end Foreclosure Report. That analysis shows the number of Tri-Cities properties with foreclosure filings has dropped to a decade low. Nationwide it fell to a 16-year low.

The low numbers are driven by government moratoria that have effectively stopped foreclosure activity on everything but vacant and abandoned properties.

“The impact of the government foreclosure moratoria and mortgage forbearance programs is nowhere more obvious than in the foreclosure start numbers from 2020. We ended the year with a near-record number of seriously delinquent loans, but historically low levels of foreclosure activity,” Sharga said. “The good news is that the government and mortgage industry succeeded in working together to prevent unnecessary foreclosures; the question remains how many homeowners whose finances have been affected by the pandemic will ultimately default on their loans, and whether the strength of the housing market will help cushion the fallout.”

Tri-Cities properties with foreclosure filings peaked at 1,277 in 2010. The 2020 total was 305, a 76% decline from the peak.

A better assessment of the situation will be available next month when ATTOM releases its Q4 Home Equity Report. The Q3 report showed that a little over 10% of the local properties were seriously underwater. That means owners owed at least 25% more on the mortgage than the property’s estimated market value.

Johnson Co. had the highest share of seriously underwater properties (21.2%) in the Q3 report, while Sullivan Co. had the lowest share (7.6%). The total number of underwater properties was 10,458. That accounted for 10.6% of the homes in the Q3 analysis.

When comparing the properties with foreclosure notices with the equity report, bear in mind the foreclosure report is for the Johnson City and Kingsport-Bristol Metropolitan Statistical Areas (MSA). The Johnson City MSA included Carter, Washington, and Unicoi counties. Kingsport-Bristol includes Hawkins and Sullivan counties in NE Tenn. and Scott and Washington counties in SW Va.

The equity report is a regional analysis for counties that meet ATTOM’s criteria for the report. Those counties include Carter, Greene, Hawkins, Johnson, Sullivan, Unicoi, and Washington counties in NE Tenn. and Washington Co. in SW Va. A drill-down on equity status can also be taken to the zip-code level.

©donfenley.com. All rights reserved.

Categories: REAL ESTATE

2 replies

  1. Don, the premise of your article does not align with the data. Even your own chart shows foreclosures are at the lowest point since 2006.

    • Thanks for the comment, Todd. You must have misread. True, properties with foreclosure actions are at a low. It also points out lenders are not instigating foreclosures now due to the government programs that prevent them. At the same time, the number of properties that are seriously underwater are building to new highs. That’s a precursor for foreclousre. The bottom line is when the forbearances are sunsetted owners will owe all of the back payments plus fees. If the forbearance lasts for a year that would mean a year’s back mortgage payments plus the fees. Unless the owner has made other provisions that would be due at one time. So, if an owner had a $750 a month mortgage his, or her, payment would be almost $10,000. Lots of pressure for refinancing and/or foreclosure. The second chart shows the number of properties that are seriously underwater. There is no breakdown of the number of local mortgages in forbearance.