A report released last week by RealtyTrac indicates that Seattle has the highest rate of increase in foreclosures across the nation.
The foreclosure rate is the percentage of properties that move into foreclosure over a given time period, for example over a quarter, or a year. The rate of change is how much this percentage changes over time. So, while cities in states such as California, Florida, Nevada and Arizona have very high foreclosure rates, these rates have not increased over the last year - in fact, in many of these cities they have decreased. Seattle, while having a lower foreclosure rate overall, has a rate that is increasing. According to the RealtyTrac report, Seattle’s foreclosure rate has increased by 71% from the third quarter of 2009 to the same quarter this year.
The report compiles data from 206 “metro areas” - American cities with populations of 200,000 or more - comparing figures from the third quarter 2010 with those of one year ago. 133 of these metro areas, or 65%, posted year-over-year increases in foreclosure activity. Of these cities, the rate of increase for the Seattle-Tacoma-Bellevue metro area, at 71%, was by far the highest rate of increase of all.
The RealtyTrac report does not provide statistics for individual cities. It does indicate, however, that metro areas within those high-foreclosure states of California, Florida, Nevada and Arizona accounted for 19 of the 20 highest foreclosure rates across the country (the only outlier was Boise City-Nampa, Idaho). Foreclosure rates in these states, while high, have held roughly steady or even decreased from one year ago. Only five of those top 20 metro areas have foreclosure rates that are still increasing; the highest rates of increase are seen in cities outside these four states.
In RealtyTrac’s 2009 report, Washington state ranked 24th nationwide, with a foreclosure rate of 1.29% for the year. A RealtyTrac report from one month ago indicates that Washington state ranks tenth for total number of foreclosures nation-wide as of the third quarter of 2010, accounting for 17,670 of 191,016, or 9.25% of foreclosures. While Washington state’s rate of foreclosure is still not extremely high, the jump from 24th to 10th in less than a year is further evidence of an accelerating rate of foreclosures statewide.
As startling as the Seattle area’s 71% increase in foreclosure activity seems (more than double second-place Chicago’s 35% increase), it is important to look at quarter-by-quarter figures and to recognize spikes in those data. As discussed on the Seattle Bubble blog, Bill SB 5810 was passed by the Washington State legislator in April 2009, becoming law in late July of the year, and substantially influencing foreclosure activity.
SB 5810 essentially adds a 30-day delay to the foreclosure process. Through the first half of 2009, lenders responded to this coming law with a batch of foreclosures fast-tracked through the first half of that year, in order to beat its implementation and possible resultant delays. This led to a lull in foreclosures for the second half of the year, meaning that the numbers for the third quarter of 2009 (to which these most recent data are compared) are artificially low - and so the annual rate of increase recorded now is artificially high.
However, while the exact rate of increase of the Seattle’s foreclosure rate, and particularly the figure of 71%, can be questioned, it is clear from the data presented on the Seattle Bubble blog that Seattle-area foreclosures for 2010 have increased substantially over 2009.
The data presented by RealtyTrac suggest that foreclosure rates within cities that have had the highest rates, such as metro areas in California, Florida, Nevada and Arizona, have already peaked and are dropping or may soon drop. In contrast, other regions, such as the Seattle area, have yet to see their peak in rates of foreclosure. Short sales, in contrast, have more than doubled nationwide from 2009 to 2010 , as an increasing number of homeowners are choosing to cut their losses and take action to prevent foreclosure.
Residential property prices continue to fall, and many analysts do not predict them to hit bottom until mid-2011 or 2012 . In regions like Seattle, where an increasing number of homes are moving into foreclosure, and some of those onward into REO (real estate owned, or bank owned) inventory, that excess inventory will only further push the downward slide in prices. A further risk to the Seattle area’s home pricing is that, in spite of substantial price drops over recent years, some analysts consider the Seattle market still to be overvalued.
With further home price drops likely and foreclosure rates on the increase, many Seattle homeowners are choosing to cut their losses, eliminate further risk, and prevent foreclosure, by negotiating with their lender to short sale their home. Nationwide, short sales have more than doubled from 2009 to 2010.
If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/
If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/
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