Foreclosures are coming back

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U.S. Foreclosure Activity Continues to Increase Despite Government Moratorium

Highest foreclosure rates in Delaware, Illinois, and Florida

Nationwide one in every 4,078 housing units had a foreclosure filing in Q1 2021. States with the highest foreclosure rates were Delaware (one in every 1,705 housing units with a foreclosure filing); Illinois (one in every 2,175 housing units); Florida (one in every 2,237 housing units); Indiana (one in every 2,397 housing units); and Ohio (one in every 2,500 housing units).

Among 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2021 were Lake Havasu City, Arizona (one in every 518 housing units); Provo, Utah (one in 1,280); McAllen, Texas (one in 1,297); Shreveport, Louisiana (one in 1,353); and Atlantic City, New Jersey (one in 1,441).

Other major metros with a population of at least 1 million and foreclosure rates in the top 50 highest nationwide, included Cleveland, Ohio at No.6, Birmingham, Alabama at No. 9, Jacksonville, Florida at No. 12, Miami, Florida at No. 34, and Riverside, California at No. 39.

Foreclosure starts increase 3 percent from last quarter

Lenders started the foreclosure process on 17,652 U.S. properties in Q1 2021, up 3 percent from the previous quarter.

Those states that saw the greatest quarterly increase in foreclosure starts and had 500 or more foreclosure starts in Q1 2021, included California (up 36 percent); Ohio (up 25 percent); North Carolina (up 15 percent); Virginia (up 11 percent); and South Carolina (up 10 percent).


Originally posted by @Fred K. :

@Mike Baxter

I wonder how high this is when compared with 2019 or 2018

I don't think it's to those levels at all yet, but to me the significance is they are starting the process again. It takes time to ramp up, They have to allocate expenditures, hire people, train them, find office space and so. Watch for a hiring spree of "customer service reps, debt counselors and processors" "with collection experience preferred" ;-) at major and midsize banks. 

 

It would be interesting to know if they are newly built homes or older, and if Class A, B, C or D, and if owner occupied or not. Plus the number of owners over the last 2 years.

@Mike Baxter - Interesting insight. In the scheme of things, the numbers are minuet. If you extrapolate that out to the normal population, that amounts to a couple hundred foreclosures depending on the area. Nonetheless super smart to keep an eye on the trend. If you see constant uptick, please post more content.

Just curious, what if the trend does continue? What strategies are you utilizing to take advantage of this foreclosure opportunity? Seller finance? Off market lead searching? Wholesaling? REOs?

I don't think we'll see a massive wave of foreclosures. I wouldn't bet on that as an inventory source. Wall St has been putting tons of capital aside preparing for it and it just isn't happening. I think may of the funds that were counting on it have had to forget about that as a source of deals. 

I agree with @Troy Gandee , I doubt there will be massive foreclosures coming, big reason is almost no one is underwater but I could see a lot of properties possibly being listed so people can try to get out with whatever equity they have so they’re not foreclosed on.

my guess is these are foreclosures that were halted by the pandemic and they are just getting ready to resume once the ban is lifted. 

Originally posted by @Andrew Freed :

@Mike Baxter- Interesting insight. In the scheme of things, the numbers are minuet. If you extrapolate that out to the normal population, that amounts to a couple hundred foreclosures depending on the area. Nonetheless super smart to keep an eye on the trend. If you see constant uptick, please post more content.

Just curious, what if the trend does continue? What strategies are you utilizing to take advantage of this foreclosure opportunity? Seller finance? Off market lead searching? Wholesaling? REOs?

I made my first Mil in the late nineties when people who went into preforeclosure had a lot of equity.

People don't go into foreclosure because they don't have equity, they go into foreclosure because they don't have cash flow. 

Right now according to the Bureau of labor Statistics there are 261,000,000 people of working age and over 100,000,000 are Not working. That number is more important to me than the U3 unemployment rate which doesn't include people who are no longer eligible to collect unemployment benefits or even the U6 which includes everyone along with the underemployed which is somewhere around 10.9%

What I see is a huge part of the population not making enough money to bring their forbearances current, landlords that have gone crazy trying to make payments on rentals where they are not collecting rent and I think I'd add in banks who are getting tired of not getting paid. Owners of properties who have not made payments for a while will have a rude awakening when moratoriums end. Already in AZ and TX you can get a foreclosure through when you have a mind to. That will only escalate.

The following chart is from King Co. Seattle in 2010. I started in Seattle (King Co.) in about 1997. This is where and when I got started by buying preforeclosures exclusively. My business boomed going forward.

As you can see the number of foreclosures was in a bit of a trough. The Blue line is Unemployment and the Red line is Foreclosures. I am not saying these numbers are here today and real estate is always local anyway, but this is an example that it doesn't take a flood of foreclosures for you to make a ton of money. Done legally, properly and ethically. But there are secret ingredients to making the soup. Don't try this at home, unless you really know what the current laws are.

Originally posted by @Mary M. :

my guess is these are foreclosures that were halted by the pandemic and they are just getting ready to resume once the ban is lifted.

Yup there are foreclosures in every cycle in every year and every month.. so if you stop them nationwide for a year which has happened you have all of those to process plus the normal years flow.. so of course the numbers will be higher its just simple math.

Although I was surprised to see Provo Utah on a list like that .. not sure how accurate that is.

 

Originally posted by @Mike Baxter :
Originally posted by @Andrew Freed:

@Mike Baxter- Interesting insight. In the scheme of things, the numbers are minuet. If you extrapolate that out to the normal population, that amounts to a couple hundred foreclosures depending on the area. Nonetheless super smart to keep an eye on the trend. If you see constant uptick, please post more content.

Just curious, what if the trend does continue? What strategies are you utilizing to take advantage of this foreclosure opportunity? Seller finance? Off market lead searching? Wholesaling? REOs?

I made my first Mil in the late nineties when people who went into preforeclosure had a lot of equity.

People don't go into foreclosure because they don't have equity, they go into foreclosure because they don't have cash flow. 

Right now according to the Bureau of labor Statistics there are 261,000,000 people of working age and over 100,000,000 are Not working. That number is more important to me than the U3 unemployment rate which doesn't include people who are no longer eligible to collect unemployment benefits or even the U6 which includes everyone along with the underemployed which is somewhere around 10.9%

What I see is a huge part of the population not making enough money to bring their forbearances current, landlords that have gone crazy trying to make payments on rentals where they are not collecting rent and I think I'd add in banks who are getting tired of not getting paid. Owners of properties who have not made payments for a while will have a rude awakening when moratoriums end. Already in AZ and TX you can get a foreclosure through when you have a mind to. That will only escalate.

The following chart is from King Co. Seattle in 2010. I started in Seattle (King Co.) in about 1997. This is where and when I got started by buying preforeclosures exclusively. My business boomed going forward.

As you can see the number of foreclosures was in a bit of a trough. The Blue line is Unemployment and the Red line is Foreclosures. I am not saying these numbers are here today and real estate is always local anyway, but this is an example that it doesn't take a flood of foreclosures for you to make a ton of money. Done legally, properly and ethically. But there are secret ingredients to making the soup. Don't try this at home, unless you really know what the current laws are.

My absolute best years at court house steps was 2002 to 2006..  same with pre foreclosures but then again as you Know Mike in Oregon and WA in 07 08 they made it very tough if not illegal to do what we used to do in OR and WA on the pre foreclosure scene which would make someone move markets for sure I went back east. LOL

 

@Jay Hinrichs

Great share. I need to dedicate more time digging into the pre foreclosure space with my cold calling efforts. The seller finance route is a great exit to build up rentals with lower down.

How did you approach the “depreciation recapture” roadblock on transfer or did you only do subject-to where it didn’t trigger?

Originally posted by @Marc Rice :

@Jay Hinrichs

Great share. I need to dedicate more time digging into the pre foreclosure space with my cold calling efforts. The seller finance route is a great exit to build up rentals with lower down.

How did you approach the “depreciation recapture” roadblock on transfer or did you only do subject-to where it didn’t trigger?

TWO things 

One when we bought it was stepped up basis.

Two most of the properties we held as inventory. 

I would not buy a pre foreclosure if there was not 20 to 50k or more of profit DAY ONE> so we could exit at anytime.

 

@Mary M. @Mike Baxter

This is exactly what we are seeing. I am a Realtor in Jacksonville and have had the privilege of getting a couple mentors who have been doing REO listings for decades. Much of what you see is the resumption of process of homes that stopped foreclosure because of COVID. Foreclosures always happen in every market to some degree but with low interest rates, high equity for most people, and shortage of housing it probably won't be happening to the degree many think

Originally posted by @Logan M. :

I would love to figure out how to find these in Provo, Utah. I'm not seeing any increase in notice of defaults so you tell me. 

I suspect the data on Provo is faulty personally. Knowing Utah and the citizens of Utah as I do.

subscribe to Property Radar is all you need to do.. @Sean OToole has created the absolute best software on the planet for the investor looking for needles in a haystack..  check it out.. And no I don't have any affiliation with PR  :)  My staff uses it and I love how robust it is .. 

 

Originally posted by @Marc Rice :

@Jay Hinrichs

Great share. I need to dedicate more time digging into the pre foreclosure space with my cold calling efforts. The seller finance route is a great exit to build up rentals with lower down.

How did you approach the “depreciation recapture” roadblock on transfer or did you only do subject-to where it didn’t trigger?

Marc one reason we had more success in those years was it was much tougher to chase foreclosures down .. And we had UBER great title company customer service that the average investor simply could not get gave us a HUGE advantage especially in pre foreclosures. 

once the on line auction companies came into the scene it changed along with the laws.

but just think about this scenario.

I get my lists my title company preps and does basic date downs day one.. so i have every NOD in the 3 county area with mortgage records on each tax records on each and liens that are easy to see on each. I did not even start to market the pre foreclosures until about 10 days before the sale and we only door knocked them. One can use direct mail but the success rate is VERY low given the competition. So by the time reality set in. IE usually 2 days before the sale maybe 3 days you now had a owner who realizes they ARE going to lose this house..

Well we make a deal I call customer service and get a date down on the phone.. I call the trustee ( most were in Seattle) I have a courier service on speed dial I call my bank having already got the reinstatement or payoff from the Trustee.. Courier goes to the bank picks up the cashiers check and gets it to their office day before the sale or in some instances by 9am the day of the sale.. and of course you can see all the sad faces at the court house steps when the Cryer reads off the sales that are removed from that days list..  Thats how we did it

took a full time person on keeping my list and title stuff up to date  3 teams of 2  door knockers and then myself.. so pull these off in this market.  And robust customer service department at the title and escrow company ( we used Chicago for this) were they would give me a title date down on the phone within 3 minutes of me calling .. and it was 97% accurate.. so some risk but heck at our level if you lose one no big deal. as you generally were only putting out 10 to 50k per deal on pre foreclosures If we had to pay cash like courthouse steps we might dive into it deeper especially if opening bid was over 500k. 

 

The current supply demand dynamic pretty much nationwide cuts against any foreclosure crisis in the near future.  We are more than 4 million homes short in this country.  In my neck of the woods, I can list a milk crate and fetch $100,000.  Who in his right mind is going to hand equity over to the bank when sales routinely close for all cash,  no contingencies and close in 10-15 days?