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"Zombie" Foreclosures a Lingering Legacy of the Housing Crisis
RealtyTrac Analysis for Q2 2014 Finds That Owner Vacated Properties Account for 21 Percent of All Active Foreclosures
IRVINE, CA--(Marketwired - Jun 26, 2014) - RealtyTrac recently analyzed zombie foreclosures for Q2 2014 -- properties that have started the foreclosure process but never been foreclosed and the homeowner has vacated the property -- one of the lingering legacies of the recent housing crisis.
Zombie foreclosures are a byproduct of lengthy foreclosure timelines and changing state foreclosure statutes. Many of these properties are likely to be the eyesores of a given neighborhood, driving down the values of surrounding homes and eroding local government tax revenue.
Distressed homeowners, who have vacated the property, may not realize they are still responsible for and owe property taxes on the zombie foreclosure -- and that means unpaid property tax revenue for the local government taxing entity. RealtyTrac estimates that more than $400 million in property tax revenue nationwide is likely delinquent because of these zombie foreclosures.
Below please find high level findings from the analysis and insight from local brokers.
Vacant foreclosures are declining nationally but still represent one in every five foreclosures
141,406 zombie foreclosures nationwide in Q2 2014 (21 percent of total properties in foreclosure)
One in every five foreclosures has been vacated by the homeowner before the foreclosure is completed
Down 7 percent from 152,033 in Q1 2014
Down 16 percent from 167,680 in Q2 2013
States bucking the trend with an increasing number of zombie foreclosures
24 states and the District of Columbia saw an increase from previous quarter
10 states and the District of Columbia saw an increase from year ago, including New Jersey (up 58 percent), New York (up 38 percent) and Maryland (up 21 percent)
Florida leads the nation in zombie foreclosures
Florida accounted for more than one-third of all zombie foreclosures (48,630). Other states in the top five were New York (12,666), New Jersey (12,170), Illinois (11,925), and Ohio (7,390).
"Most of these states have seen an increase in new foreclosure activity over the past year, creating a more fertile breeding ground for zombie foreclosures," said Daren Blomquist, vice president at RealtyTrac. "For example, New Jersey foreclosure activity year-to-date is up 57 percent from a year ago, Maryland up 23 percent, Delaware up 16 percent, Maine up 12 percent, Wyoming up 27 percent, and Iowa up 6 percent. These states are bucking the national trend, where foreclosure activity is down 23 percent YTD compared to a year ago. New York is about flat in terms of foreclosure activity year-to-date, but it's coming off a long string of increases that ended in March this year. Prior to March, foreclosure activity in New York had increased on a year-over-year basis for 23 consecutive months."
States with zombie foreclosures that had been in foreclosure for the longest average time were New York (418 days), Florida (411 days), New Jersey (378 days), Illinois (272 days), and Hawaii (249 days).
States with biggest declines in zombie foreclosures
Zombie foreclosures declined in 38 states, led by California, where they were down 57 percent. Other states with big decreases in zombie foreclosures compared to a year ago included Arizona (down 51 percent), Nevada (down 50 percent), Washington (down 45 percent), Ohio (down 24 percent), and Oklahoma (down 22 percent).
"We are seeing fewer vacant foreclosures throughout the Ohio market. Many lending servicers appear to be taking advantage of the increased demand for listings, and working with delinquent homeowners to place their properties on the market while still occupying the property," said Michael Mahon, executive vice president/broker at HER Realtors, covering the Columbus, Cincinnati and Dayton, Ohio markets. "The winding down of the glut of foreclosure properties appears to be pointing to signs of continued housing recovery for the future."
"The REO inventory in the Oklahoma market is at its lowest level in seven years paralleling the downward trend in vacant foreclosure properties year over year," said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty, covering the Oklahoma City and Tulsa, Okla., markets. "The banks are catching up with their zombie foreclosures and we are working our way back to normal."
Financial institutions with the most zombie foreclosures
Financial institutions listed as the beneficiary on the foreclosure documents with the most zombie foreclosures were Wells Fargo (18,695), Bank of America (15,175), Chase (10,312), and U.S. Bancorp (10,141).
"As distressed inventory continues to wind down banks are working through their more difficult occupied REOs and foreclosure properties, which explains the decrease in vacant foreclosures compared to this time last year," said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market.
Pending legislation in many states could help
Some states such as Florida and Illinois have passed foreclosure "fast track" legislation designed to help move these abandoned foreclosures through the system more quickly. New York is considering legislation now to address vacant properties, including making lenders responsible for upkeep of zombie foreclosures before they complete the lengthy foreclosure process. Local governments are working to leverage land banks to soak up the zombie foreclosures and either rehab them or demolish them. This is prominent in cities like Cleveland and Detroit, but also Cook County (Chicago) recently created a land bank.
Methodology
RealtyTrac gathers data for vacant foreclosures by matching foreclosures in the RealtyTrac database with data collected from the United States Postal Service for addresses that the agency has deemed vacant or where the owner has requested a change of address.
About RealtyTrac
RealtyTrac is a leading supplier of U.S. real estate data, with nationwide parcel-level records for more than 125 million U.S. parcels that include property characteristics, tax assessor data, sales and mortgage deed records, Automated Valuation Models (AVMs) and 20 million active and historical default, foreclosure auction and bank-owned properties. RealtyTrac's housing data and foreclosure reports are relied on by many federal government agencies, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.
