Foreclosures soar

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.

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.

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.

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.

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.

"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."

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.

"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."

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.

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.

"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."

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.

"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.

"Hopefully, if we continue to see these types of trends over the next four to six months, fewer people will be losing their homes."

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.

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.

That said, the foreclosure situation could get worse before it gets better, he said.

"A large percentage of those 40,000 layoffs were homeowners," who were hanging on to their homes by living off their reserves, Groves said.

"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."

Real estate became lucrative in the last Depression, for a while, as it offered some possibilities for investment, for people who had some money, and certainly in production/industry there was not much to offer.

But soon after that "blossom," it is the banks which end up owning the properties, as loans default.

Banks become big real estate holders in poor times.

Probably, the federal government will step in, to establish local zoning controls befitting the nationalizing socialists' agenda ... but step in the name of helping folks by assuming the mortgages.

People will like it; until eventually the economy improves and then the other foot lands: the enforcment of federal laws about what you can and cannot do with your property.

See: Sustaining Nothing, Losing Everything, Sierra Times, June 20, 2002, by Tom DeWeese (posted June 21, 2002 by brityank).

"What is Sustainable Development? ...
On June 29, 1993, former President Bill Clinton issued Executive Order #12852 to create the President's Council on Sustainable Development. Sustainable Development calls for changing the very infrastructure of the nation away from private ownership and control of property to nothing short of a national zoning system.
Locally elected officials will no longer be the single driving force in making decisions for their communities. Rules will be made behind the scenes in non-elected "sustainability councils" armed with truckloads of federal regulations, guidelines and money.
According to Sustainable Development policies, air conditioning, convenience foods, single-family housing and cars are among the products that have already been determined to be unsustainable. Under such a system, the federal government, backed by an army of private, non-governmental organizations.
(NGOs), like the Sierra Club, Planned Parenthood, and the National Education Association will influence, if not dictate, policy in state governments and in local communities...
...The Community Character Act (S.975), and its counterpart in the House of Representatives (H.R.1433), is the legislation that will legalize enforcement of Sustainable Development in every community in the nation. The bill requires local governments to implement land-management plans using guidelines outlined in a federal document called the "Smart Growth Legislative Guidebook." This publication was developed with $2 million provided by the Clinton Administration to "guide" counties, cities and towns on how to "update their local zoning."
The Community Character Act offers grants to communities that will pay up to 90% of the costs for localities to "update" their zoning, but only if they do it the way the federal government dictates. The Community Character Act requires localities to "conserve historic, scenic, natural and cultural resources." These are euphemisms that mean more land grabs and fewer places where people can freely go about their daily lives. It means planned economies, restricted housing, and diminished use of cars. It means government control of property. The bill contains not a single mention of private-property rights protection..."

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