Triad foreclosures highest in state in '07

Drop in loan rates may help this year, analysts say

By: Richard Craver | Winston-Salem Journal
Published: January 31, 2008

A steady housing market - not too hot, not too cold - has protected the Triad well over the years.
But it couldn't protect the region from a big jump in foreclosures in 2007 - the Triad had the largest percentage increase in foreclosures among North Carolina's metropolitan areas, according to data released yesterday by RealtyTrac.com, an Internet company that lists foreclosed homes.

The Winston-Salem metropolitan statistical area reported 2,067 home foreclosures, an increase of 92 percent from 2006. Only the Greensboro-High Point MSA, with a 109 percent increase to 3,330, had a larger increase among urban counties.

Although the Winston-Salem MSA consists of Davie, Forsyth, Stokes and Yadkin counties, Forsyth had the vast majority of the foreclosures at 1,840 - up 102 percent from 909 in 2006.

Overall, North Carolina reported a 67 percent increase to 37,426 homes. The number of foreclosures in the United States rose 75 percent to 2.2 million.

A report presented by the N.C. Commissioner of Banks to the General Assembly on Jan. 23 provided little comfort on the state of the housing market.

It found that there could be an increase of up to 20 percent in foreclosures in North Carolina this year for three main reasons - more subprime loans posing payment shock as adjustable-rate mortgages reset at higher levels, slowing growth of home prices coupled with high leverage ratios, and a spillover from slowing economic conditions.

"We're expecting that the 2008 rate could be as bad as 2007, if not a little worse, because you have homes that entered the foreclosure pipeline in 2007 that will be completed this year," said Daren Blomquist, a communications manager for RealtyTrac.com.

"There is hope that the federal mortgage-relief plan will keep more homes from entering foreclosure proceedings this year."

The Triad and North Carolina remain relatively low risks for foreclosures compared to the rest of the nation, Blomquist said.

"This area is better suited to weather the foreclosure storm than most, but the wild card is the psychological outlook of local homeowners to local housing values."

Michael Walden, an economics professor at N.C. State University, said he was "surprised by the elevated level of foreclosures last year. I anticipated an increase with the rise in interest rates, but I did not forecast the seriousness of the problem."

However, the recent drops in the benchmark interest rate - from 4.25 percent to 3 percent since Jan. 22 - have made Walden more optimistic that the rate of foreclosures this year may not exceed the level in 2007.

"These interest-rate drops will lower the level of anticipated foreclosures coming this year when a large volume of adjustable-rate mortgages reset their rate," he said. "This doesn't mean we're out of the woods, but maybe we now have one foot in the clearing."

The foreclosure report is just the latest piece of negative news bumping the local housing market.

Existing-home sales in the Triad continue to fall, according to local housing reports. Figures released by the N.C. Association of Realtors last Thursday showed that existing-home sales fell 16 percent to 1,102 in December 2007, compared with 1,306 in December 2006.

But the average sales price in the Triad was unchanged at $182,192 in December, compared with the same period in 2006.

The local economy is projected to take a $72 million hit related to foreclosures, according to a national forecast released in November at the U.S. Conference of Mayors meeting. However, the effect on the area is expected to be significantly less than in the state's other metropolitan areas.

Mark Vitner, a senior economist at Wachovia Securities, said he expects more foreclosures in 2008 from investors trying flip a home for a quick profit.

Mounting problem:

Forsyth County had a bigger percentage increase in foreclosures during 2007 than most urban areas of the state.

County 2005 2006 2007 Change from 2006

Cumberland 563 859 1,510 76%

Durham 650 1,207 1,941 61%

Forsyth 908 909 1,840 102%

Gaston 519 1,147 2,008 75%

Guilford 933 1,165 2,687 131%

Mecklenburg 3,012 6,096 9,227 51%

Wake 1,590 2,405 4,029 68%

North Carolina 15,921 22,476 37,426 67%