When the EL Paso County Trustee’s office released its November foreclosure numbers, the month-over-month increase of 10.5-percent was not the only troubling statistic.
The data also showed that 2010 will likely be the second worst year for foreclosures on record, and County Trustee Thomas Mowle doesn’t expect enough job growth in 2011 to offset the figures.
“I’m getting more and more pessimistic about the situation,” Mowle said this week. “I thought the structural issues in real estate would finally be offset by an improvement in the local economy, but we’re just not seeing it.”
Kevin Kudrna, a short-sale specialist at Keller Williams Realty, shares this grim view.
“(Foreclosures) will increase for at least another year or two, you can’t just put the brakes on something this big,” he said. “Some people are even projecting this out until 2014, although I’m not ready to get that bold just yet.”
El Paso County has set a new record for foreclosures every year since 2006, and there have been more foreclosures since 2007 than in the previous 14 years combined. Foreclosures peaked in 2009 at 5,470, although barring a catastrophic December, the county will see a moderate decline in 2010. There have been 4,396 foreclosure starts through November.
Foreclosures have even persisted through an impressive stock market rally and slowly improving economic data. Kudrna cites a roll call of financial ills that he said are facing homeowners in the “real” economy.
“I’m seeing a lot of homeowners go into foreclosures because of layoffs, cuts in pay, or because they’re moving to find work and can’t sell their house,” he said. “All of this has combined to keep the foreclosure numbers high.”
While it seems like an eternity ago, the housing market is still paying for sins committed during the bubble years. The widespread excess of those days has been a major factor in sustaining the foreclosure trend.
“For a long time the banking industry projected the final surge in foreclosures to be in 2011 or early 2012,” Mowle said. “That’s when we’ll be seeing foreclosures from the final batch of adjustable rate mortgage loans given out in 2004 and 2005 that will be re-setting.”
Loan resets might not have the impact of previous years, but there are broader systemic issues at play now.
“Interest rates are really low, so getting a loan reset at this point won’t be nearly as catastrophic,” Mowle said. “The problem is the persistent and rising unemployment in El Paso County. It’s higher here than in the rest of the state. It doesn’t matter what the terms of your mortgage are, if people don’t have jobs, foreclosures will just get worse next year.”
El Paso County’s unemployment rate was at 8.8-percent in October, compared to a statewide rate of 8.1-percent. Fortunately for those out of work, President Obama and the Republicans announced a compromise Tuesday that would extend expiring unemployment benefits for an additional 13 months. While this will keep some segment of the population from facing foreclosure, Mowle has concerns about other federal initiatives.
“There’s a freeze on federal worker pay which will reduce the amount of money people thought they were going to have, and this will have a ripple effect,” he said. “It could affect the federal dollars that are used to pay military contracts. These policies might benefit the country’s deficit, but they adversely impact this area.”
Shadow inventory will also continue to dog the housing market. Banks are holding off on putting foreclosed properties up for sale so as not to flood the market with inventory, which would result in even further price declines.
Kudrna raised another concern — that banks have not done enough to extend loan modifications to homeowners struggling with payments.
“On some of these, the lender takes so long before denying the modification that the house goes into foreclosure, which then takes away the option of a short-sale,” he said.
Still, there are stabilizing factors in El Paso County that might keep the foreclosure mess from deteriorating further.
“The military presence helps out quite a bit, and may even contribute to a recovery,” Kudrna said. “The military offers better job security than the private sector, and they have access to VA loans with no down payment.”
But that’s cold comfort for existing homeowners who now must weatherize in preparation for another stormy year.