- Metro-area home foreclosures are headed for their highest
level in 11 years, as the battered economy leads to a huge spike in homeowners
defaulting on mortgages in the first half of the year.
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- Foreclosures rose by 53.7 percent in the first six months
of the year, compared with the same period in 2001, assuming that Denver
and Jefferson counties continue the same pace of previous months. Those
two counties have not tallied their foreclosures through June.
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- Adams, Arapahoe, Boulder, Broomfield and Douglas counties
report a total of 2,130 foreclosures in the first half of the year, compared
with 1,365 foreclosures through June of last year, a 57 percent increase.
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- Toss in expected foreclosures from Denver and Jefferson
counties and the number in the seven-county region rises to more than 3,500
through June of this year, compared with 2,306 in the first half of 2001.
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- That would be the most yearly foreclosures since 5,379
in 1992.
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- Whatever the final number, the trend is clear: Foreclosures
are going through the roof.
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- Most experts blame the increase on the huge number of
job losses in the past year, as well as homeowners pulling all the equity
out of their homes by refinancing. But they are divided over whether the
worst has passed.
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- "The big question to me is whether we are heading
for a double-dip recession or we are just slowly coming out of it,"
said Wil Armstrong, principal of Cherry Creek Mortgage. "I guess the
jury is still out."
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- Jeff Thredgold, economist for Vectra Bank Colorado, said
the Denver area has lost about 40,000 jobs during the past year, the biggest
factor in rising foreclosures.
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- "A lot of people didn't have the financial clout
to survive that and keep their houses," Thredgold said. "What
made matters worse is the economic strength along the Front Range in the
prior five to seven years, which fueled a level of optimism and rising
home prices that people felt would last forever."
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- Under those circumstances, many people with high-paying
jobs bought bigger and more expensive homes than they could afford once
they lost their jobs, he said.
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- While the median and average prices of previously owned
homes hit never-seen-before highs last month of $225,000 and $270,519,
respectively, that doesn't reflect the thousands of homeowners who refinanced
and took all of the equity of their homes.
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- "I've had some clients who lost their jobs, who
had sucked all of the equity out of their homes, and when they went to
the closing they were lucky to break even," said David Binikowski,
principal of Real Estate of the Rockies in Denver. "You have to beware
of those 120 percent loans. Be wary of loans that take out all of the equity
in your home. That's financial suicide."
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- Economist Patty Silverstein, principal of Development
Research Partners, said there are some signs that the worst may be over
for the economy, which ultimately will stem the tide of foreclosures.
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- "A lot of the layoff activity occurred in 2001,
and we're starting to see some better job growth," she said. "Since
January, we've added 23,600 jobs in the Denver metro region, which is still
below last year at this time, but is at least a positive number. And the
seven-county unemployment rate was 5 percent in May, although it is still
5.6 percent for the year-to-date average, which is twice what it was last
year.
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- "Hopefully, if we continue to see these types of
trends over the next four to six months, fewer people will be losing their
homes."
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- The number of foreclosures peaked at 17,090 during the
energy crash of 1988. Today's situation is nowhere near as dire as in the
late 1980s, said Brad Groves, chief financial officer of Universal Lending.
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- Groves said that 3,500 foreclosures is a "big, scary
number and a 50 percent increase is huge," but noted that as a percentage
of all homes on the market a relatively small amount are ending up in foreclosure.
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- That said, the foreclosure situation could get worse
before it gets better, he said.
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- "A large percentage of those 40,000 layoffs were
homeowners," who were hanging on to their homes by living off their
reserves, Groves said.
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- "And while it has become far too socially acceptable
to go into foreclosure or bankruptcy," he said, "people usually
don't throw in the towel on their homes until they absolutely have to.
I think what happens depends a lot on whether those 40,000 people are able
to find jobs."
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- http://www.rockymountainnews.com/drmn/real_es
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