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During the Great Financial Crisis, zombie foreclosures skyrocketed, causing neighborhoods to become blighted and property values to plummet. Some fear that we could find ourselves in a similar situation if another housing bubble occurs. A zombie foreclosure refers to a situation in which a homeowner has abandoned their property after receiving a foreclosure notice, but the lender never completed the foreclosure process. The homeowner still owns the property, which is vacant and unsellable, hence the term “zombie.”
Like in horror movies, while a single zombie can be defeated, a large number of zombie foreclosures presents a whole different challenge. Fortunately, the latest data from Attom shows that we are not currently in zombie danger. The company found that the number of abandoned homes going into foreclosure has dropped 20% year-over-year, with only one in 14,000 homes remaining vacant during foreclosure.
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The report shows that there are 1.4 million vacant residential properties in the United States, or about one in 76 homes. The overall foreclosure rate is down 6% quarter-on-quarter and over 29% year-on-year, showing a solid positive trend.
The trend is a welcome change from last year, when the zombie foreclosure rate was rising. Last year, it was 15.3%. While that was only one in 11,412 homes, it was enough to raise fears that further weakness could be coming. Instead, it may have been the result of the increase in foreclosures after pandemic-related foreclosure moratoriums expired.
As Attom CEO Rob Barber pointed out, this cycle is different because owners have much more equity in their homes. This gives them options if they run into financial difficulties. “One important factor is the historically high level of equity,” Barber said. “This provides a strong incentive for homeowners who may be struggling with their mortgage payments to negotiate new payment plans, which in turn reduces the number of foreclosures. As a result, fewer owners are simply abandoning their properties, as so many did after the Great Recession in the late 2000s.”
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Where zombies and foreclosures might appear
One place to watch for zombies is Florida. The number of zombie properties in Florida has increased 64%, from 1,199 to 1,961, indicating a potential trend to keep an eye on. This is still a relatively small number, but it reflects an overall weakening of the housing market in certain parts of the state. In July, Attom reported that Florida ranks second in the nation in the number of foreclosures. In Florida, too, prices are stabilizing and even declining in some areas as inventory increases. The latest report from Florida Realtors found that the supply of single-family homes is at 4.6 months' supply and the supply of condos and townhomes has reached 7.4 months.
This is a deal to keep an eye on, as a new report from Redfin showed that average monthly homeowners association (HOA) fees are rising in many Florida markets. In Tampa, they rose 17.2% and in Orlando, they rose 16.7%. Redfin analyzed HOA fees and condo/co-op sales prices in MLS listings in 43 areas and found an average increase of 5.7% across all metropolitan areas. Higher insurance prices are the reason for the HOA increases. These higher fees are starting to weigh on condo prices across the state. “Condos are really being affected. Prices are suffering,” said Eric Auciello, a Redfin sales manager in Tampa. “Condominium fees are exploding due to increased insurance costs. These additional fees have negatively impacted the value of many units.”
Florida's problems are still relatively minor, and the state is still experiencing an influx of residents in many cities. As Realtor.com puts it, the state is a tale of two real estate markets: condo prices on the coast are falling, while prices in the interior are holding steady.
This article Zombies, go away! New report shows positive real estate trend originally appeared on Benzinga.com
