Delaware second in foreclosures nationally
But home sales up 13 percent
Delaware’s foreclosure rate was the second highest in the country in March, according to RealtyTrac. One in every 579 homes was in some stage of foreclosure – compared with 1 in every 1,212 nationally.
Kent County has the most foreclosed homes – 1 in every 478. New Castle County is second with 1 in every 536. Sussex County, buoyed by beach sales, has the lowest rate – 1 in every 776.
“The good news is those foreclosures are mostly tied to the last housing crisis and not a new wave of distress,” said Daren Blomquist, vice president of RealtyTrac. “The bad news is now we’ve seen four consecutive months where foreclosures have increased on a year-over-year basis.”
Homes sales and home prices are actually edging up in Delaware – closings were up 13 percent to 16,132 this year, and median price climbed slightly to $193,486, according to National Association of Realtors figures.
RealtyTrac’s Blomquist predicted Delaware’s hidden inventory – homes that banks own but have not marketed – will work its way through the system by this time in 2017. The banks first put homes back on the market in Wilmington, and they are slowly trickling homes back in the suburbs and at the beaches, said Bill McCormick of CK Capital Management in Wilmington.
“If the banks were to dump them all back on the market at the same time, what do you think that would do to property values?” McCormick asked.
Here’s a short list of the hundreds of hidden-inventory homes listed on RealtyTrac: a plain-Jane row home in Claymont, a two-bath condo in a choice Wilmington high-rise, an attractive four-bedroom in Camden-Wyoming, a boarded-up row home on Wilmington’s West Side and a two-story house with three garages in Kenton.
RealtyTrac’s Blomquist said it appears banks are slowly pushing the Delaware’s bank-owned properties out for sale as the market perks up: “Some properties are sitting there in disrepair and sometimes abandoned. So, in a sense, this is good news because the banks are finally dealing with them. And, at the end of the process, there’s going to be a new homeowner in that home who is mowing the lawn and taking care of the place.”
Bob Miller of Luke Real Estate in Wilmington said the local market has stabilized and the banks are being careful not to tip it: “What I see the banks doing is kind of staggering sales and not flooding the market with a bunch of foreclosures. They’re kind of holding them back and slowly releasing them.”
Four of the five top states for foreclosures all require a sometimes-lengthy judicial process to protect homeowners in foreclosure cases – top-ranked Maryland, Delaware, New Jersey and Florida. Delaware’s process takes an average of 328 days, according to RealtyTrac.
“We’ve seen this surprise increase in foreclosures in some other states like in Delaware, and it does seem to be in what we call judicial foreclosure states where the states handle foreclosures through the courts,” Blomquist said. “The unintended consequence of that is it delayed a lot of foreclosures, but it didn’t prevent them. And I think that’s what’s happening in Delaware.”
While the average time for a home in a non-judicial state to move through foreclosure is 60 days, homes in judicial foreclosure states move much more slowly, according to Adam DeSanctis of the National Association of Realtors.
New Castle County Sheriff Trinidad Navarro said many of the foreclosures counted in the March statistics have been in the pipeline for years.
Navarro said his office had to bring in extra staff during the post-crash months between January 2011 and April 2012 because they set up 350 sheriff’s sales every month to meet demand, but, after the General Assembly passed the Automatic Residential Mortgage Foreclosure Mediation Program that forced lenders to go to mediation with homeowners, sheriff’s sales almost completely stopped for a short time. Now they average about 100 sales monthly, which Navarro said is close to their pre-crash number.
Some distressed houses take months to rehab before they can be put on the market. Lewes agent Fred Dean said he’s seen properties where intruders or owners took all the copper piping or even removed all the walls. Bob McVey, the Rehoboth broker who heads the Delaware Association of Realtors, said someone removed the electrical panel from one house and left all the wires hanging in the walls.
“The majority of foreclosures are missing appliances or there’s some sort of damage inside the house that needs to be repaired,” McVey said. “Sometimes the banks that own the properties will make the repairs prior to selling them. I’ve seen a house where they took the tankless water heater. I’ve seen wall ovens removed. They don’t leave much when they leave.”
While the bad loans of the early 2000s put the foreclosure business on steroids, foreclosures will always be a factor in the market because the top reasons for foreclosure are job loss, downsizing, relocation, divorce, medical bills and illness or death of a borrower, CK Capital’s McCormick said.
“Foreclosure happened at the heights of the market and it happens at the bottom of the market because people still lose their jobs in a good economy, people still get divorced in a good economy, and people still get sick in a good economy,” he said.