Local foreclosures break record, but rate can't compare

Colorado Springs’ housing market suffered through one of its worst downturns in recent memory during 2007. Foreclosures broke a 19-year-old record, home construction slowed to a pace not seen since the early 1990s and home sales fell.

Don’t expect much of a turnaround in 2008, some economists and real estate experts said Wednesday.

Some homeowners will lose their properties because of ongoing fallout from the nation’s mortgage industry meltdown, the experts said.

And as foreclosed homes come on the market, they’ll continue to create competition for builders and the resale market, where prices already have declined during the past few months.

“I can’t see any quick fixes,” said Bobby Ingels, a developer and new president of the Housing and Building Association of Colorado Springs. “I really think this mortgage thing has to work itself out.”

Despite the record, the rate of foreclosures isn’t as bad as it was 20 years ago because there are thousands more homes now.

During the third quarter of 2007, the Colorado Division of Housing estimated El Paso County had one foreclosure for every 84 households; 20 years ago, the rate was roughly one for every 28 households.

Also, not all homeowners who fall into foreclosure lose their homes. In 2007, nearly 37 percent of all El Paso County foreclosures were withdrawn by the lender or “cured” by homeowners who caught up on their payments, according to the El Paso County Public Trustee’s Office, which processes foreclosure filings.

In recent years, lenders in the Springs and nationwide made loans to homebuyers with shaky credit history. In many cases, lenders wooed those buyers with interest-only, adjustable rate and no-down-payment mortgages — so-called exotic loans.

Several parties, not just lenders, are to blame for the mortgage woes, said El Paso County Public Trustee Carol Snyder. Homebuilders, real estate agents and mortgage brokers all eagerly worked to sell homes, she said, while many buyers bought too much home for their budgets.

“You put a larger housing stock with all of the creative financing, and all the eager people at all ends of the spectrum, and you end up in the situation we are in now,” Snyder said.

The effects of mounting foreclosures extend beyond the loss of a home.

There’s a relationship between rising numbers of foreclosures and the area’s homebuilding slowdown, said Fred Crowley, a University of Colorado at Colorado Springs economist.

Some homebuyers probably have decided against purchasing a new house because they can buy a discounted foreclosure and save thousands of dollars, Crowley said.

Other homeowners who want to move to a newly built home can’t do so because they’ve been unable to sell their existing home — a problem created, in part, because too many foreclosed homes have flooded the market, Crowley said. More homes could depress prices, especially for existing homes.

Several builders laid off workers last year because of the decline in home construction. They also stepped up their use of incentives to get buyers in the door.

Last year’s construction slump also hurt local governments. The city and county, which rely on sales tax revenue from building materials, cut millions from their budgets because of declining sales tax collections.

Less revenue means less money to fund public safety, parks and other services, city and county officials say.

Housing numbers for 2007 showed:

-- El Paso County foreclosures totaled 3,556, breaking the record of 3,476 in 1988, according to the Public Trustee’s Office. In December, the trustee’s office reported 450 foreclosures; that figure set a single-month record and surpassed the 435 foreclosures in El Paso County during all of 1995.

-- Single-family building permits last year in El Paso County fell to 2,135, down 38 percent from 2006 and the lowest annual total since 1,154 permits were issued in 1991, according to the Pikes Peak Regional Building Department. In December, single-family permits totaled 82, a 45 percent decline from the same month last year and the lowest one-month figure since 54 permits were issued in February 1991.

-- Home sales totaled 9,995 last year, down 16.1 percent from 11,911 in 2006, according to the Pikes Peak Association of Realtors. It was the lowest annual sales total since 2002. The median price of homes sold in December and whose transactions were handled by real estate agents fell 4.5 percent to $214,882 when compared with the same month last year. The 4.5 percent decline was the largest percentage decrease since 1994, when the association began keeping the statistic.

If there’s good news for the housing industry, it’s that real estate experts say it’s a great time to buy a house. Thirty-year fixed-rate loans are hovering around 6 percent and buyers have a huge selection.

“You can get a very, very attractive 30-year fixed-rate mortgage if you can qualify, and you have an enormous opportunity to buy,” Crowley said.

Snyder said she expects 2008 to be similar to 2007 for foreclosures because some homeowners took out exotic loans in 2006 and 2007. When homeowners’ variable mortgage rates adjust upward, or if a job loss or medical expense crimps their finances, they could wind up in foreclosure.

CONTACT THE WRITER: 636-0228 or rich.laden@gazette.com