Foreclosure fever
More Charleston-area property owners face losing homes to mortgage lenders
The Post and Courier
Charleston County Master-in-Equity Judy Dawkins sorts through files on foreclosure lawsuits. During the second quarter, 871 foreclosure lawsuits were filed against property owners in the Charleston area.
The Post and Courier
Stacks of foreclosure files fill Charleston County Master-in-Equity Judy Dawkins' office in the county courthouse.
Fewer homeowners are able to keep up with loan payments on their properties, leading to higher-than-ever foreclosure rates across the Charleston area.
Foreclosures in the region hovered around recent records during the second quarter as lenders filed a total of 871 foreclosure lawsuits against property owners, an analysis by The Post and Courier has found.
The new numbers show that:
--Charleston County had 451 foreclosure filings for the three-month period that ended in June.
--Berkeley County's filings totaled 225 for the same period.
Combined, foreclosure filings in the two counties rose 59 percent compared to the same quarter last year.
--Dorchester County, which tracks its foreclosures by measuring the number of properties set for sale, had a 73 percent increase from the same period last year.
Increasingly, some of the residences lenders are taking back are in the more affluent parts of the Lowcountry.
On Kiawah and Seabrook islands, for example, a dozen foreclosure actions were filed during the second quarter. In the recent past, the islands have seen one or two foreclosures a quarter.
And the filing rate has nearly doubled this year in Mount Pleasant, with a total of 200 foreclosures.
While the increase in filings is steep, local real estate experts agree that the fallout in the Charleston region has been tame compared to foreclosure hot spots such as Florida, Arizona and California, where home values are plummeting.
Still, the increase in filings is putting a strain on companies such as Family Services Inc., a nonprofit that provides foreclosure counseling to struggling homeowners. The North Charleston-based company was forced to dip into its reserve funds to hire extra counselors but it still can't keep up with the demand for help, counselor Debbie Kidd said.
Most property owners wait until they're six months behind in their payments before contacting Family Services, Kidd said.
While a lender can file a foreclosure lawsuit when the borrower is three months behind in payments, it can take from six months to a year for the property to be sold at a county auction.
"I have people call me all the time and what they say is, 'I've never asked for help before, but I need it now,' " she said.
Some homeowners fell into default after their monthly adjustable-rate mortgage payments rose. Dorchester County, which lists loan interest rates for its foreclosed properties, shows that rates on some soured mortgages were well above 10 percent.
By contrast, the average 30-year fixed-rate home loan was 6.26 percent last week, according to mortgage finance company Freddie Mac.
Some financially strapped homeowners who contact foreclosure counselors work in the real estate market, which has slowed dramatically over the past two years. With fewer homes to build, inspect, sell and finance, workers in the largely commission- and bonus-based industry are left without a reliable source of income, Kidd said.
Foreclosure counselors, who are working with more than 700 property owners across the state, have tried to accommodate hesitant or embarrassed homeowners by sending out counseling documents and providing services over the phone.
"When they're facing an auction date," Kidd said, "they will suck it up and come in."
A 2005 study from Freddie Mac found that 75 percent of late-paying borrowers got phone calls and letters from their lenders, but few borrowers made the effort to work with the company.
Many study respondents said they were embarrassed, scared and felt like the companies couldn't help them. Others thought they could take care of the situation on their own by, for example, trying to sell the home.
But some property owners who tried to solve the problem independently have encountered rude service and long waits from lenders' collection departments, Kidd said. Foreclosure counselors who are approved by the U.S. Department of Housing and Urban Development usually have better luck negotiating.
Meanwhile, the climbing foreclosure rate across the Lowcountry is worsening the stress on the local real estate market, which already faces tough challenges.
There are about 11,000 homes for sale in the area, according to the Charleston Trident Association of Realtors. Adding more foreclosed properties to the already swollen number of homes for sale in the area exacerbates the problem.
Also, to homeowners who are trying to sell their properties, a foreclosed home in their neighborhood can be stiff competition, said Cheyanne Lake, who specializes in distressed properties for Mount Pleasant-based Reiland Lake Realty.
Banks usually price vacant homes below market value in an effort to make a quick sale, she said. The strategy seems to work. After comparing the average sale time for foreclosed properties and typical homes earlier this year, she found that foreclosed properties sold about 40 days faster than conventionally marketed homes.
Buyers might have to buy new carpets and make minor repairs because foreclosed properties can fall into disrepair while sitting vacant.
"If there are five homes for sale in the neighborhood and there's a foreclosure that's in decent shape, it will probably outsell the other ones," Lake said.
What's less clear is how a foreclosed property affects the value of nearby homes.
A national study by the Fannie Mae Foundation in 2006 found that homes near a foreclosure usually lose 1 percent of their value. But Mount Pleasant-based real estate appraiser Joseph "Jody" Guerry disagrees with the study's results, saying that foreclosed property sales are special cases.
He said real estate appraisers don't consider the sale price of foreclosed properties when determining the value of a nearby home because the bank's motivation to sell is different from other sellers.
"They aren't pricing it to get the higher return. They're pricing it to recover their loan loss," he said. "Bank foreclosures don't represent market value."
Michael Buettner of the Post and Courier contributed to this report. Reach Katy Stech at 937-5549 or kstech@postandcourier.com.
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Comments
Ron_Godzilla (anonymous) says...
Wait a minute! My real estate agent and mortgage broker SPECIFICALLY told me that the Charleston real estate market was recession proof and that this market was rock solid and my property would be shielded from any economic downturn and that my property would continue on a never ending upward path of increased value because this was the nature of Charleston Real Estate and if you think this market is going to sour you are crazy! I believe the people who spewed this river of BS are back waiting tables at Outback and Chiles.
July 20, 2008 at 12:44 a.m. ( permalink | suggest removal )
Neponset (anonymous) says...
Ron
It is hard to get straight answers around here when the "experts" are all directly or indirectly involved in real estate and are trying to convince folks that this down turn has bottomed out and its time to pick up the bargains.
Unfortunately what contracts there are, are mostly contingent contracts and little is selling.
July 20, 2008 at 6:44 a.m. ( permalink | suggest removal )
Neponset (anonymous) says...
I don't like the last 2 paragraphs. It appears that appraisors do not include forclosure sales in their comparables - thus their appraised values will be higher than the current overall market - have they learned nothing from this disaster - looks like buyers may get screwed again, if the market continues to go down.
July 20, 2008 at 7:03 a.m. ( permalink | suggest removal )
jammer (anonymous) says...
"They aren't pricing it to get the higher return. They're pricing it to recover their loan loss," he said. "Bank foreclosures don't represent market value."
boy this guy has a rude awakening coming, anyone see the special on Ohio's vacant neighborhoods yesterday and how it effected houses nearby? the whole neighborhood wasn't worth $1000 anymore... no one wants to live next to a bunch of boarded up vacant houses, which will happen here in some areas as well in time
housing values will plummet here too, glad I bought way back when I did...
July 20, 2008 at 9:11 a.m. ( permalink | suggest removal )
moonpie (anonymous) says...
"real estate appraisers don't consider the sale price of foreclosed properties when determining the value of a nearby home"
YOU BETTER START USING THIS WHEN APPRAISING HOMES BECAUSE IT WILL BE THE NEW NORMAL PRICE NOT THE INFLATED PRICE USED FOR THE PAST 10 YRS! IF I WAS BUYING THIS WOULD BE INCLUDED BY ME. THANK GOD IT'S PUBLIC INFO...
July 20, 2008 at 9:19 a.m. ( permalink | suggest removal )
moonpie (anonymous) says...
Neponset exactly right. It's almost hiliarious what some agents told us in the boom and what has actually occured! Over inflated prices, I guess they just try and get the most they can for everything.
I'll start my search again for something on the lake or near the beach. Prices are a dropping!
Hey what about the moldy homes? Can't wait to see how that effects the neighborhood in DI. every peroson in the neighborhood should be filing a class action suit against DR Horton. They're all screwed not just the two homes with mold!
July 20, 2008 at 9:27 a.m. ( permalink | suggest removal )
Neponset (anonymous) says...
Moon
Thanks for your support. In my area, which is older, but desirable, nothing is moving, and the few contracts that have been signed are contingent on selling their house. To excluse forclosure sales in comparables just keeps this train of lies going and more people will get hurt. With this additional load (of forclosures) on the inventory of houses for sale, suggests that things will get worse before things level off.
July 20, 2008 at 10:16 a.m. ( permalink | suggest removal )
Neponset (anonymous) says...
I am a little bit disappointed that the real estate and appraiser folks have not weighted in on this topic, perhaps they are at Church praying for a miracle.
July 20, 2008 at 10:28 a.m. ( permalink | suggest removal )
Egap (anonymous) says...
Huh...who'd a think a July Snowjob in Charleston?
Every house I've bought, realtor's were quick to point out that ,with my income, I could afford a bigger house.
Now, My mortgage payment is not quite half of my retirement income and feel for "the cattle".
July 20, 2008 at 10:46 a.m. ( permalink | suggest removal )
cinnabar (anonymous) says...
Root cause of this problem is the politicians pandering to those not able to qualify for credit 5-10 years ago and pressuring banks to extend credit to unworthy borrowers. This act freed up money that pushed up prices and pressure to loan money to anyone who could sign his name. The market and housing prices overexpanded as a result. Now you see the correction and it appears we will all pay the price once again....
July 20, 2008 at 10:54 a.m. ( permalink | suggest removal )
rollo (anonymous) says...
Jammer,
Ohio is a totally different market, most of those houses are empty because the former occupants couldn't find work and abandoned the area.
Their search for more opportunity has helped keep our market up.
July 20, 2008 at 10:58 a.m. ( permalink | suggest removal )
willx45x (anonymous) says...
Prices have not even begun to drop as much as they will over the next 12-18 months. Areas like MP and DI are still tremendously overpriced and nothing is moving in these areas because sellers are unrealistic and getting bad advice from agents. Want the local market to recover? GET REAL WITH PRICES SELLERS AND AGENTS! We've got 30% left to go on the downside so you fools might as well get on with it. The idea that the Charleston real estate market is bubble "proof" or "different" from the rest of the country is absolutely absurd on its face and is being proven false every single day. In fact, areas like MP and DI were among the highest-appreciating areas in the country during the first half of this decade and they will be among the most severely depreciating areas over the next several years. The local demographics simply don't support these prices and the vaunted "second home market" cannot support these prices any longer because their first homes are losing value every day.
Pretty much everything the local R/E people have told you about the Charleston market is a lie. Don't believe them. If you are a prospective buyer, the best thing for you to do is to WAIT. WAIT and WAIT some more. These sellers and stupid agents will get religion soon enough. Don't catch a falling knife people! Don't be a sucker!
July 20, 2008 at 11:03 a.m. ( permalink | suggest removal )
tallblonde (anonymous) says...
When you're buying....you hear the "Charleston market is recession-proof"
When you sell - you hear the "We need to drop the price in order to be competitive"
July 20, 2008 at 11:14 a.m. ( permalink | suggest removal )
Egap (anonymous) says...
I've just been reminded of the folks who have purchased some nice downtown "Boutique Condos" at an overpriced contracted pre-build price. A year later after completion, other units in the same building are not selling and those prices have been lowered 100K or more to sell. Hmmm...recession proof eh?
July 20, 2008 at 11:31 a.m. ( permalink | suggest removal )
whome (anonymous) says...
"Root cause of this problem is the politicians pandering to those not able to qualify for credit 5-10 years ago and pressuring banks to extend credit to unworthy borrowers."
--------------------------
I don't think that the Investment Banks that created the securitization process, earning billions in the process, needed any incentive from Washington to lower creditworthiness.
Archdude:
I agree that the bottom is between 2-3 years and will return to about 1996-1998 levels, or about 2-3X median incomes. This would mean the median home sales in an area like Mt. Pleasant would be about 100K-150K. The problem is whether the value will be in real dollars or nominal dollars. Between the foreclosures and the credit crunch, the prices of housing will fall dramatically, especially in communities where driving to work can cost $500/month. Plus, I just don't think people realize how hard it is to get a mortgage these days. Jumbo (417K+), forget about it. This process will really start escalating this fall, when the non-subprime mortgages (Alt-A, Option ARMS, interest only) start to reset en masse.
While I don't mind housing prices reverting to affordable levels, the problem is that this is will be the first recession that was caused by housing. Of course, this makes sense b/c so many people were living of the "wealth effect" of their quickly appreciating homes. Any industry that has exposure to faux consumer wealth (e.g. Starbucks, golf clubs) will be hurting. Meanwhile, SC tax revenues will crater b/c it relies too much on discretionary spending, especially hospitality, that depend on the wealth effect. Oh but don't worry, they'll just raise taxes or franchise "fees".
Ironically, the only thing keeping this state from an official recession are agriculture exports, boosted by the weak dollar. While we pay more for food, so does the rest of the world.
July 20, 2008 at 11:36 a.m. ( permalink | suggest removal )
studley (anonymous) says...
No fair minded person relishes seeing someone lose their home. However, as noted in other posts, buyers and lenders made very poor decisions. The Latin phrases Caveat Emptor (buyer beware) and caveat venditor (seller beware) come to mind.
If you bail out the buyers and lenders you reward bad behavior and poor decision making. My wife and I chose not to "keep up with the Jonses", we chose to be rational economic agents and live within our means. Should money be taken from our pockets to assist some who chose a life style they could not sustain? Do I have to fund a European vacation for them so they will feel good about themselves?
Another Latin phrase comes to mind - Res ipsa loquitor - The facts speak for themselves.
July 20, 2008 at 11:53 a.m. ( permalink | suggest removal )
drp7773 (anonymous) says...
85,000 for a 30 year old singlewide mobile home on 1/4 acre mmmm can you say real estate greed and time for some major changes on how real estate is priced and financed.
July 20, 2008 at 3:11 p.m. ( permalink | suggest removal )
FiscalConservative (anonymous) says...
I hope these prices plummet even further. I need a new house. This is going to work out great for people who need a new home and are credit worthy. They will be able to get a nice home not some 2br west ashley home 1200sf for 300k.
July 20, 2008 at 3:56 p.m. ( permalink | suggest removal )
furman (anonymous) says...
Who is the goof-ball of an appraiser that says that appraisers don't consider the sale price of foreclosed properties when determining the value of a nearby home. Is he nuts? How does he keep his license? I live in the Upstate and am in banking. I see everyday how the sale of foreclosed properties is effecting values of other homes in the same neighborhood. As a matter of fact, as a banker, that is one of the first things I look at before I even order an outside appraisal. I've had several appraisals recently in which the appraiser called me to let me know how the foreclosure activity has lowered the value of other homes in the neighborhood. It is a fact and just pure common sense that a neighborhood with several foreclosure sales will effect the price of other homes.
July 20, 2008 at 3:56 p.m. ( permalink | suggest removal )
whome (anonymous) says...
archdude:
I can't see how the dollar would appreciate, especially given the Fed's intent on keeping rates low, ostensibly to prevent a hard landing for real estate. Remember, it was the Fed's tightening in 2007 (up to about 5.25%) that ignited subprime defaults. The Fed WILL NOT allow that to happen to the rest of the ARMS; so, get used to the weaker dollar, especially when foreign holders diversify their assets. Unfortunately, the lower monthly payments aren't going to matter given the rate of declining home prices. It's like the people who said that the rebate checks would go towards their mortgages; what are they going to do next month? The government's only hope is that the lenders rewrite mortgages to more affordable prices, given that foreclosures generally result in a 30% haircut. Here's a scary chart; more resets are coming.
http://www.bubbleinfo.com/storage/ivy...
The comparison of Charleston to other bubbles is difficult. If I recall correctly, the Massachusetts housing bubble was started with the huge influx of capital generated by the biotech boom. Same thing happened out in Silicon Valley with the Nasdaq boom. Now ask yourself, what generated the Charleston real estate boom? As far as I can tell, mostly Northerners (Ohio, NY, Oprah) who cashed out of their own bubbles and moved here, pulling the locals along for the ride. This theory explains why we're somewhat being in the price declines. As far as I can tell, we don't have enough employment to sustain these prices, especially when housing starts bleeding into the real economy. I'm sure people "on the ground" can attest to the fact that discretionary spending has fallen off a cliff. More downward pressure will come when the wealthy out-of-towners, facing economic problems in their areas, have to liquidate their million dollar second homes. All in all, I expect housing prices in some areas to decline 75% in real prices from their 2006 highs. Like I said earlier, housing prices might stabilize at higher nominal prices. You'll know if you're paying $10/gallon of milk.
Regardless of who's in charge, the next five years are going to be one hell of a ride.
July 20, 2008 at 5:07 p.m. ( permalink | suggest removal )
Ron_Godzilla (anonymous) says...
This is just the beginning. The market here has always been over inflated. Can you say crash and burn because that is what is going to happen over the course of the next year or so. Glad I don't own an over inflated DH Horton or Centex home in Mt P. I'd be worried, real worried.
July 20, 2008 at 6:07 p.m. ( permalink | suggest removal )
moonpie (anonymous) says...
All good post and in agreement that the Charleston market has not seen bottom yet. I drive through areas we had thought about building in and houses, lots, etc have been sitting for over a year and a half now. Some houses started in Tanner Hall have been started that long and construction has stopped. These will also drap down the home prices. How does the developer allow that to happen?
July 20, 2008 at 8:43 p.m. ( permalink | suggest removal )
rollo (anonymous) says...
Arch
Few jobs is better than no jobs.
I never said the answer is here, I said this is where many are seeking the answer.
July 20, 2008 at 10:06 p.m. ( permalink | suggest removal )
marina (anonymous) says...
It's sad to see so many people loosing their dream home to foreclosure. But there is always a way in case of mortgage delinquency in earlier stages.
Read this article in this link for foreclosure articles
http://www.mortgagebuyerbasics.com/st...
Some of the important things you can do to avoid foreclosure are-
1)Don't buy a house which you cannot afford.
2)Pay your mortgage payments.
3)In any case if you are missing or behind on house payments and is unable to catch up, then inform your lender about it. It is your responsibility to notify your lender, so that he can explain you the entire process and what to expect.
4)Know about 'Loss Mitigation Process'
'Loss mitigation Process' was initiated by the government of America to help people get out of a Foreclosure situation. This clause has many options, like -
Loan modification - Under this, the terms of the loan mortgage could be modified for the ease of homeowner and help him get out of foreclosure.
VA loan modification or refunding - Under this option, homeowner's loan is bought by the VA (Veterans Affairs).
Short Payoff this is another option where the lender may chose to buy the property from the borrower so that the latter is able to get out the foreclosure situation.
Deed-in-lieu in this, those homeowners who need to sell their house in a foreclosure situation (and their property has been on the sale for 90 days), get a repayment plan. This is valid for those who are past due for two or more months in their payments.
5)Attend free training or seminars conducted by non profit organizations to help homeowners avoiding foreclosure. They may help you in negotiating with the lender or may find any other alternative way of stopping foreclosure.
6)You can also consult foreclosure assistance companies. But there are many predatory companies who are not what they appear to be. Do your homework, check their reputation and give them a call, speak with one of the professionals and you will be able to judge for yourself. In fact some of them offer free consultation.
July 21, 2008 at 6:04 a.m. ( permalink | suggest removal )
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