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Seattle Records Highest Annual Rate of Increase in Foreclosures Nationwide - But The Numbers May Not Be Quite As Bad As They Appear.

Seattle Short Sales - Wednesday, November 03, 2010

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/

Home prices dropping nationwide, economists don’t foresee recovery until 2011 or 2012.

Seattle Short Sales - Wednesday, October 27, 2010

In the midst of numerous reports released this month that indicate that housing prices have been dropping nation-wide, Clear Capital (as reported by DSNews.com) issued a report last week with a “market alert”, identifying an abrupt 5.9% drop in U.S. home prices over the two month period of September to October.

Clear Capital’s analysis differs from that of many other price indices in that it gathers and analyses data in “real time”; most of the other indices work to analyze data from previous months.

The Clear Capital analysis confirms trends noted in the other indices, but it suggests that the speed at which home prices are dropping may be increasing. For example, a Morgan Stanley report published at the beginning of this month noted that home sales are slowing, and that both the number of home sales in 2010 and the average number of home sales for 2009 and 2010 are expected to be lower than they were in 2008.

An analysis by CoreLogic, using data from this past August and reported by DSNews.com this week, revealed that average home prices have dropped by 1.5% from the previous August - the first time the CoreLogic index has ever recorded an annual housing price drop. According to their analysis, home prices have fallen by an average of 28.2% from their peak in April 2006.

And, in a report released yesterday by DSNews.com, the S&P Case-Shiller index also indicated that home prices dropped from July to August. Their 20-city composite index registered a 0.2% drop over the month, but still records an increase of 1.7% over August 2009.

While the Wall Street Journal reported last week that home sales picked up by 10% in September over August, at the seasonally adjusted rate, both they and other analysts do not see signs of any significant recovery any time soon. Indeed, the difference between the small drops indicated by the retrospective indices (using data from mid-2010) and the Clear Capital “real time” index, which indicates accelerated price losses, suggests that worse times may be to come.

Many analysts attribute price drops over the last few months, at least in part, to the expiry of the federal government’s “home buyer tax credit” program - which allowed a tax credit of up to $8,000 for home buyers who had not owned a home in the last three years - but which expired this past April. This tax credit induced a flurry of home buying early in the year, as prospective buyers rushed to make purchases.

The Clear Capital analysis indicates that the recent home price drops, of nearly 6% over September-October, bring average home prices to the same level they were at in mid-April, immediately before the expiry of the tax credit.

Analysts are pessimistic about any recovery in home prices over the next one to two years. The Morgan Stanley report predicts a continued drop in home prices of 5 to 10% through to 2011 and another four years of flat prices (this prediction, based upon mid-year data, comes before the recent 6% drop recorded by Clear Capital), as well as an increased risk of a continued downslide even through 2012. According to the Wall Street Journal, half of 109 economists polled predicted housing prices to bottom out in 2011, while the other half did not expect the trough to hit bottom until 2012.

In addition to the expiry of the home buyer tax credit as a purchase incentive, another factor in continued low prices is the current high level of housing inventory. With somewhere between 4 and 5 million American homes either currently under foreclosure, or more than 3 months delinquent and soon to face foreclosure, the number of homes on the market stands to double. Greater supply leads to drops in price. Additionally, as some of these homes fail to sell at auction and move to REO “shadow inventory,” banks as owners will be more likely than private homeowners to drop prices to accelerate sales and shed inventory.

A report released this week by the National Association of Realtors, quoted by the Wall Street Journal, indicated that over one third of home sales in September were foreclosures or “distressed” sales (e.g. short sales). Short sales have become an increasingly favorable option for distressed home owners to take charge of their finances rather than await foreclosure. But, perhaps more importantly, short sales will aid in the longer-term housing price recovery by keeping homes on the market, rather than moving through foreclosure and into an ever-increasing shadow inventory that will only delay any chance of home price rebound.

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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