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"The number of foreclosure filings in Wayne County, dominated by activity in the city of Detroit, dipped in February, the most recent figures available. But Oakland and Macomb counties' share of homes in foreclosure increased by double-digit percentages over the same month a year before, according to RealtyTrac, a California-based company that tracks housing numbers."
"The role reversal is attributable to many factors, including layoffs of suburban breadwinners -- blue- and white-collar alike -- and a recent surge in mortgage payment resets on types of loans more common outside Detroit's city limits."
"The spike in foreclosures has had one surprising effect: Home sales are on the rise. The market here fell so hard and fast that it quickly gained worldwide attention for "$1 houses," which investors have been snapping up by the dozens."
Monday, April 13, 2009
ReplyDeleteForeclosures hit suburbs as layoffs surge, mortgages reset
Foreclosures drop in Wayne Co. but soar in Oakland, Macomb
Nathan Hurst / The Detroit News
The foreclosure tsunami that flattened Detroit's real estate market is now swamping the suburbs.
The number of foreclosure filings in Wayne County, dominated by activity in the city of Detroit, dipped in February, the most recent figures available. But Oakland and Macomb counties' share of homes in foreclosure increased by double-digit percentages over the same month a year before, according to RealtyTrac, a California-based company that tracks housing numbers.
"Detroit isn't the only area where we're seeing the core urban county experiencing a decrease in foreclosures while the farther-out counties are seeing an increase," said RealtyTrac's Daren Blomquist. "Cleveland and Chicago are looking similar."
The role reversal is attributable to many factors, including layoffs of suburban breadwinners -- blue- and white-collar alike -- and a recent surge in mortgage payment resets on types of loans more common outside Detroit's city limits.
A majority of Detroit's foreclosed homes were lost by people who bought houses with subprime loans, which carry higher interest rates in exchange for allowing borrowers with bad credit and spotty employment history to qualify.
Since many homeowners with adjustable rate subprimes began seeing their monthly payments jump in late 2007 and early 2008, last year's foreclosure surge hit Wayne County hard, and early. Michigan's largest county topped the region, and at times the nation, in foreclosure filings per number of existing properties.
But now, foreclosures in Wayne County are decreasing -- down 29.05 percent in February from the same month a year earlier -- while Oakland and Macomb are up, 25.12 percent and 62.5 percent respectively in February, according to RealtyTrac data. Foreclosures in Livingston County fell last month too, by 30.88 percent. But its comparatively low number of properties makes nailing down trends there difficult.
Besides layoffs, salary reductions and other recessionary factors, many suburban homeowners are watching their adjustable rate Alt-A mortgages -- which are between prime and subprime mortgages in interest rates and risk for the bank -- reset with higher payments.
That is forcing some families who owe more on their homes than they are worth to walk away from their property, sell at a loss or face foreclosure. A growing number of owners are rushing toward the brink because home values have fallen so precipitously in recent months: Local prices have, on average, fallen to levels not seen since the mid-1990s.
Short sales entice buyers
The spike in foreclosures has had one surprising effect: Home sales are on the rise. The market here fell so hard and fast that it quickly gained worldwide attention for "$1 houses," which investors have been snapping up by the dozens.
Real estate agents pitching suburban properties say the recent spate of foreclosures in Metro Detroit has made once exclusive, expensive suburbs affordable to people who previously didn't have a prayer of living there.
In Grosse Pointe, for example, a foreclosed home just off fashionable Lake Shore Drive, with views of Lake St. Clair, is going for half its bygone asking price of $1.2 million. Similar bargains beckon buyers in some of southeast Michigan's most attractive locations, including Bloomfield Hills, Pinckney and Chesterfield.
First-time buyer Dan Glander recently closed on his three-bedroom, two-bath home in Clawson. He paid roughly $86,000 through a short sale: The previous owners' lenders elected to take a partial payment for the two remaining mortgages, rather than risk losing more money with a foreclosure sale in an already-packed market. In recent years, similar homes in the neighborhood were going for about twice that amount.
"I was really lucky," said Glander, a native Metro Detroiter who in November returned to the area from a stint in Chicago. "But it took some patience."
Glander's representative, Keena Catanzaro, a broker/owner at RE/MAX Partners in Royal Oak, said his short-sale transaction, which took four months to complete, is a prime example of how clogged with foreclosures Oakland and Macomb counties have become.
"There are so many foreclosures overwhelming the banks that it's taking months at a time to come close to closing a deal," Catanzaro said. "And you can't get away from them. We're seeing 80 percent and higher of sales being foreclosures or short sales in some areas."
The growing number of foreclosures has broad impact: It's putting the squeeze on already tight municipal budgets in the suburbs, where more empty units mean fewer tax receipts and big problems with structural dilapidation and neighborhood safety. The proportion of vacant housing units has grown in all Metro Detroit counties in recent years, according to the Southeast Michigan Council of Governments.
Buyers feel frustrated
Paperwork associated with foreclosures and short sales is usually more complicated and can take longer to complete. Catanzaro and other agents say the overwhelming number of such transactions have bred a number of frustrating situations for buyers.
One of Catanzaro's clients recently had to wait so long to hear back from one department of a bank on an offer of just under $60,000 for an Oakland County home that another department of the bank lowered the price to under $40,000 in the meantime.
While the owner benefited from the 33 percent discount, the price drop caused paperwork backups that tacked on extra weeks to an already monthslong process.
"I guess the one good thing is people are interested in looking at a lot of properties," Catanzaro said. "But there's so many houses in trouble. It's tough to sort it all out."
nhurst@detnews.com (313) 222-2293