Foreclosures up 32 percent in first quarter

Every metro county reports increase, but rate still below 1980s

John Rebchook, Rocky Mountain News

Saturday, June 3, 2006

Home foreclosures in the Denver area rose by almost 32 percent in the first quarter from a year earlier, with each of the seven metro counties showing an increase, according to an analysis by the Genesis Group.

But the percentage of homes going into foreclosure still is a fraction of those in a previous foreclosure crisis in 1988, according to the analysis.

"We've been worried for a long time that we're getting close to this record high, but we never looked back to the '80s to see how our foreclosure rate is comparing to today," said Mike Rinner of the Genesis Group, which tracks housing along the Front Range.

"How many foreclosures we have now doesn't really matter, because we have added so many more people," he added.

Last year there were 14,367 foreclosures, topped only by 17,122 foreclosures in 1988.

In 2005, 2 percent of all homes in the metro area ended up in foreclosure, the highest rate in 15 years. Some 2.4 percent went into foreclosure in 1990, according to the number-crunching by Genesis.

In the first quarter, 0.7 percent of the houses in the metro area were in foreclosure, with Denver and Adams counties having the highest overall numbers.

"While (the) total number of foreclosures continues to increase in every county, foreclosure rates still have not achieved the highs of the late 1980s," the report notes. It also says the rate has been as low as 0.4 percent, in 1995.

Rising foreclosures are due to "aggressive lending practices (low or no required down payments, interest-only loans, etc.) and slower property appreciation," according to the report. "With such aggressive lending practices, it has been easier to purchase a home, but with the changing economy it has become increasingly more difficult to keep a home from foreclosing."

However, Lou Barnes, principal of Boulder West Financial, said that rising foreclosures aren't being caused by aggressive lending but rather by a lack of appreciation.

And that is because builders, from "south Denver to Wyoming along I-25," are building too many homes.

"The northern urban corridor is now (a) game of musical chairs in which every time the music stops, the guy brings out three more chairs," he wrote in a recent e-mail. He said anyone who has bought a new home in the past five years in the Longmont-Greeley, Erie-Denver International Airport area and now has to sell is under water as builders offer incentives to new buyers.

Rinner disagrees. He said home builders only construct homes to meet demand, but because so many new home sales are contingent on people selling their existing homes, about 20 percent of the new home buyers cancel their orders.

"Builders must work hard to sell one of every five homes at least twice," Rinner said.

He added that Boulder, because of decades of anti-growth policies, has "distorted normal housing supply and demand for years," forcing people to move to Adams and Weld counties to find affordable housing.

"In other words, Boulder has been exporting its residential growth, encouraging traffic and sprawl," Rinner said.

Metro-area foreclosure rates

County 1988 2005 1st Qtr 2006

Adams 4% 3.1% 1%

Arapahoe 4.4% 2.5% 0.8%

Boulder 2% 0.8% 0.3%

Broomfield NA 1.1% 0.4%

Denver 4.1% 2.8% 0.9%

Douglas 3.8% 1.2% 0.4%

Jefferson 3.2% 1.3% 0.4%

Metro Denver 3.7% 2% 0.7%Source: Genesis Group

rebchookj@RockyMountainNews.com or 303-892-5207