Trustee: Foreclosures to drop off in late 2012

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Foreclosures will continue to fall in 2012, leading to an improved real estate market for El Paso County in 2013.

Public Trustee Tom Mowle said that there were fewer foreclosures in 2011, and he expects that trend to continue.

There were 3,603 foreclosure starts in 2011, down 25 percent from 4,828 in 2010 and down 34 percent from their 2009 peak.  The reversal from current trends will come later in the year, he said.

“I expect the same 300 to 350 foreclosure starts per month to continue for the next seven to eight months,” Mowle said.

Then, barring an economic catastrophe, he said he expects them to level off.

“That should be the end of the creative financing,” he said.

The trend looks similar to the foreclosure trends following the 1989 savings and loan crisis, Mowle said. Foreclosures at that time continued to fall off in 1991 even though the country was in recession because most of the bad mortgages had already completed the foreclosure process.

Most of the same areas had the highest and lowest foreclosure rates as in 2010. Falcon, Peyton, Palmer Lake, Calhan and Fountain have the highest foreclosure rates while Elbert, Cascade, Manitou Springs and Rockrimmon had the lowest foreclosure rates. Briargate also dropped and now boasts one of the lowest foreclosure rates in the area.

The areas farther away from the city center tend to have higher foreclosure rates, while those closer to the mountains in more treed areas tend to have the lowest foreclosure rates, Mowle said.

Last year had more high-priced foreclosures and higher loan balances on those foreclosures than in 2010.

There were six foreclosures with prices more than $10 million in 2011 and only two in 2010. Among those high-dollar foreclosures were the Rustic Hills Shopping Plaza and the Colorado Market Center, both with remaining loan balances higher than $19 million.

There were seven foreclosures that were more than $10 million in 2009, though they accounted for a smaller percentage of the total as there were more foreclosures that year. And there were none over $10 million in 2008.

The most expensive foreclosures in 2010 were the Erindale Center at $15.35 million and the Peaceful Valley vacant land at $14.2 million.

Along with higher values, El Paso County Public Trustee Tom Mowle said he noticed something else.

“It seems like there are more real, no-kidding, buildings in foreclosure this year than last,” Mowle said.

More of the high-priced foreclosures this year are buildings rather than vacant land, he said. Eight of the top 10 most expensive foreclosures were vacant land in 2010. That dropped to six this year, including two parcels owned by Southwest Holdings that went into foreclosure in mid-December.

Mowle said he has no explanation for the trend, but hypothesized that cash flow or the hope of cash flow probably allowed property owners to hang on to occupied land longer than vacant land through the crisis.

“Land that is vacant has zero cash flow,” Mowle said. “If you have a building on the land, you have some cash flow or at least the hope of getting cash flow. You just need a tenant. You don’t have to build a building and then get a tenant.”

Deed releases, which occur when a homeowner pays off the lien on a property through time, a sale or refinancing were down 7 percent in 2011, continuing an eight-year trend. Deed releases are a rough measure of the health of the real estate market, Mowle said. And they haven’t been this low per capita since 1995.

Mowle’s office has trimmed staff through the year as a result of the workload from releases and foreclosures falling off. He started the year with 10 full time employees and now has six full time and two part time employees.