Foreclosures hit ritzy homes, too
Douglas County latest casualty of market in Q1
By John Rebchook, Rocky Mountain News (Contact)
Published May 15, 2008 at 9:36 a.m.
Photo by George Kochaniec Jr. / The Rocky
This Castle Rock home is in foreclosure in Douglas County, which witnessed a 78 percent rise in first-quarter filings. Statewide, foreclosures were up 23 percent.
Foreclosures. They're not just for low-priced homes anymore.
Douglas County, one of the richest and fastest-growing counties in the nation, is seeing on average one $1 million home go into foreclosure each week.
"I haven't seen any $2 million homes yet, but I definitely have seen homes pushing $1.5 million," said Dianne Bailey, the Douglas County public trustee.
She said that the homes are mostly speculative - those built without buyers - constructed by custom-home or larger builders.
"These are typically developer-built homes that have never been sold," she said. "They are not typically owner-occupied homes."
It's not just Douglas County where expensive homes are going into foreclosure. Bailey noted that none of the homes in last year's Parade of Homes in Arapahoe County has sold, and one is in foreclosure.
Bailey said most of the houses entering foreclosure in Douglas County are in the $300,000 to $350,000 range, while in the past they had been in the $250,000 to $300,000 range.
Bailey blamed adjustable rate mortgages moving upward for the increase in expensive homes going into foreclosure.
In the first quarter, foreclosures in Douglas County jumped 78 percent, the largest increase from the same period a year earlier, according to a report released Thursday by the Colorado Division of Housing.
There were 665 foreclosures in Douglas County in the first quarter, compared with 373 a year earlier.
Statewide, foreclosure filings were 23 percent higher during the first quarter of 2008 compared with a year earlier, according to the division.
Overall, 11,630 new foreclosures were filed during the first quarter, compared with 9,443 for the same period last year. There were 39,915 new foreclosure filings reported during 2007.
That equates to one foreclosure filing for every 159 households. Adams County had the highest foreclosure rate with one foreclosure filing for every 86 households, while Weld County showed one foreclosure filing for every 102 households.
Mike Rinner of the Genesis Group, which tracks housing along the Front Range, said he isn't surprised that expensive homes in Douglas County are increasingly being foreclosed on.
"The lower end of the market is still the most hit by foreclosures," Rinner said. "But if you can't sell your lower-end home, it puts you at a disadvantage to move up. It means there are not as many new-home buyers. It's a reverse snowball effect, if you will. Or a trickling up of bad news, instead of a trickling down of good economic news."
He noted that when a home just begins the foreclosure process, the owner, not the lender, can still try to sell it.
"Any good broker will tell you that if a home is priced right, it will sell," Rinner said.
He said some builders may have been trying to sell a house for $1.2 million that cost them $900,000 to build and until the foreclosure were unwilling to budge on the price.
"The lender starts the foreclosure to protect itself, and the builder gets a reality shot," Rinner said.
Independent broker Gary Bauer also said he isn't surprised that more expensive new homes are going into foreclosure.
"Builders who have been trying to scrape by are now getting caught," Bauer said.
Statewide, foreclosures likely will continue to rise this year but not as rapidly as in past years.
According to the housing division study, foreclosure filings for 2008 are likely to be 15 percent higher than record 2007 totals. Foreclosure filings increased 30 percent during 2006 and 40 percent during 2007.
"We're glad to see a break in the rate of increase in new foreclosures opened," said Kathi Williams, director of the Colorado Division of Housing and co-chairwoman of the Colorado Foreclosure Prevention Task Force.
"What we'd really like to see is a drop in the total number of new foreclosures this year. However, adjustable rate mortgages will continue to reset through 2009, and the cost of living looks like it will continue to increase this year. That will likely mean we won't see any drop in foreclosure numbers this year."
rebchookj@RockyMountainNews.com or 303-954-5207
Year-over-year filings
County/Q1 2007/Q1 2008/Percent change
Adams 1,456 1,704 UP 17%
Arapahoe 1,569 1,851 UP 18%
Boulder 214 278 UP 30%
Broomfield 53 79 UP 49%
Denver 1,940 2,042 UP 5%
Douglas 373 665 UP 78%
El Paso 828 1,216 UP 47%
Jefferson 839 1,010 UP 20%
Larimer 382 487 UP 27%
Mesa 102 119 UP 16%
Pueblo 383 383 0%
Weld 647 813 UP 26%
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May 15, 2008
10:19 a.m.
Suggest removal
WarrenJimmyBuffett writes:
Just remember potential buyers, a flood of foreclosures translates to lower prices in the future. Buying now is a good way to lose money. Wait a couple of years.
May 15, 2008
4:21 p.m.
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JWinters writes:
Grunt: Its easy.... If you buy a foreclosed home now, say for 300k and then 10 more foreclosures happen in your new neighborhood, and the bank has to auction those properties off to get their principal back, they will auction it to the highest bidder...But in order to even get people to bid they would have to sell it "below market" (especially if the home is in less than perfect shape)- and with the amount of foreclosures on the market now (there were 40,000 foreclosure filings in Colorado in 2007- though not all these went to auction) this effect is drastically multiplied- thus depreciating home prices until there is far less supply of homes. Its just simple supply and demand, not to mention the fact that its nearly impossible to get a loan on investment (vs owner occupied)poroperties now which further increases supply and forces down the demand.
May 16, 2008
1:59 a.m.
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gethoht writes:
Yay... now I can buy a house. It's about time that sanity entered the real estate market.
May 16, 2008
5:31 a.m.
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windbourne writes:
Oh yeah grunt. We went through this back in the 80's. We will see home prices depress ALL the way around. When a home that is worth 1M, goes for 3/4M, then homes that were in 3/4 range will go for 600K, so on, and so on.
About the only places that will not be going down further are those at the bottom (condos, townhomes) as well as those that are in locations that have nothing similar (close to Denver, a lake, or easily accessible mountain home).
The part that is going to hurt is that the builders quit building 200-500K homes. They have moved on to much larger homes. They are loaded with speculation all over. For example Shea's back country. They have a number of homes there that Shea was specing and this will backfire on them. Those homes will end up changing from 600K-1M to 400-600K within the next year. This is also going to stop nearly ALL building in the Denver basin over the next 6 months.
Sit tight and do not buy. Best thing is to watch the national recession. Historically, we are about 1-2 years behind them in downturn AND upturn. Once the nation is heading up for 6-12 months, buy then. Within 1-2 years, we will see major upturns.
May 16, 2008
6:20 a.m.
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youngman writes:
windbourne is right....what amazes me is all the real estate "professionals" telling any media outlet that "it" is over.....We still have a few big banks to fail, if the feds don't keep bailing them out, and millions more mortgages to reset....then the appraisers have to get in line with the new values....and then there will be a bottom....local governments are going to try to raise taxes on the lower values and banks have tightened loan requirement....this both lower the affordibility.......todays housing numbers will hopefully be down..we don't need new inventory. Colorado is a lager from the rest of the country. Keep you eyes open.....if you really want the house buy it...but better deals can be had if you wait.
May 16, 2008
7:04 a.m.
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Acemon writes:
Are these the unfortunate souls that our tax dollars will help bail out? Will their tears on TV move the politicians to speed up legislation to avert the morgage crisis? I have zero pity for people in that price range. Let them eat caviar-flavored cake.
May 16, 2008
8:49 a.m.
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American100 writes:
They are mostly spec homes. Built buy contractors who don't have buyers.
Bad business move on their part.
I am a custom builder but build for customers, not spec.
How many mortgages can one really carry on spec? Scary.
Bad for the builder but good for some savvy investor who approaches the bank with an offer.
May 16, 2008
9:20 a.m.
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vudumom writes:
Where is Salazar and Perlman when you need them? I smell a bailout sometime soon for the rich.
May 16, 2008
11:01 a.m.
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snuffy40726 writes:
This is why it is more important than ever to seek a real estate professionals advice. If someone wants to pursue a high end foreclosure they should go to www.atriumusa.com and find someone with experience to help them.
May 16, 2008
11:02 a.m.
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gethoht writes:
Gene,
What the hell are you talking about?
Hand holding? The pubs do as much hand holding as the dems, the only difference is that the pubs ilk is more along the line of bear stearns and giant military contractors who scam the american public for all they're worth.
May 16, 2008
1 p.m.
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Ztliano writes:
I bought my townhome for cheap. The $350 mortgage really helps me! Lower-priced home's are great! I don't know why anyone would buy $300k homes, when you can buy a townhome for $70k OR LESS. lol. Tell me,,,, do you REALLY need all that space with a bigger home. The answer is NO!
May 16, 2008
1:21 p.m.
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segseg writes:
Ztliano asks why anyone would buy a house for $300k........because we can....that is why.
And now is a great time to buy. The selection of homes is huge, rates are down, and most builders will work with you to sell your current home if you are having problems.
Buy now at the bottom of the market, not later when it starts to swing up.
May 16, 2008
1:41 p.m.
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EastVail writes:
We have a loooooong way down to go. No one is entitled to own property. It is a privilege that some lose from time to time, rich or poor.
May 16, 2008
1:46 p.m.
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jaybyrd writes:
Apparently they are not $1 million homes, after all. Check with PT Barnum next time you want to purchase a house.
May 16, 2008
4:53 p.m.
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rqo writes:
Hmm - nice to see not all comments are from pollyanna RE agents. I'm moving to Douglas Co. next month from Southern California (absolute house price melt-down going on here). It took forever to find a Parker or Castle Rock house with acreage with a realistic price, (i.e. well below assessed value, since that is pegged to June 2006, the absolute peak in the market). I'm still afraid we'll lose 10% in value over the next year. Probably wise no one in Denver counts on any appreciation in the next 2 years, and for goodness sake, avoid tract houses on tiny lots far out in the suburbs. $5.00 gasoline will kill those values more or less permanently.
May 16, 2008
5 p.m.
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rqo writes:
Forgot to mention even bank repo departments are in denial over Douglas County. We made a 383,000 offer (20% discount) on a 477,000 house in Larkspur, vacant since last August and owned by Countrywide, of all people. Their counteroffer was 475,000. $5 says the place is still vacant 6 months from now.
May 16, 2008
8:54 p.m.
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WarrenJimmyBuffett writes:
rqo,
Banks won't admit they are wrong or those people will lose their jobs. I've heard it said many times (from bankers). Those people will lose their jobs eventually, but are trying to hold on as long as possible.
May 16, 2008
8:59 p.m.
Suggest removal
denvernorthwest writes:
Zitiano, once you add in your HOA dues you end up paying more than a single family home. The reality is that it is opportunity time for someone. It is always a good time to buy if it is right for you.If I saw a house that I love that was 1M last year and now it is 700k, I amdoing flips. So what if it might go down a little more in the short term, if that is the home I want I will take the risk vs. losing it to some other savvy buyer.
My reality is that I don't wait for chumps to tell me when it a good time to buy or sell and neither should you.