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.”
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