The State of the Foreclosure Market in Montgomery County

If I asked a group of people to say the first word that comes to mind when they hear the word “foreclosure”, I would probably get lots of different responses. Many would say “travesty”. Some would say “opportunity”. Any lenders present might say “backstop”. It all depends on one’s perspective.

2009 was another year in which too many homes went into foreclosure. While foreclosed homes are sold to the highest bidder on the courthouse steps, most of them have first liens (i.e. mortgages) with a remaining balance that is more than what buyers are willing to bid. Since the first lien holder is usually willing to bid their lien amount, they typically end up as the highest bidder. So the ownership of most homes in foreclosure ultimately transfer from the individual homeowners to their lender.

After the foreclosure is finalized, the majority of those properties are then listed and eventually sold by Realtors. Almost 1,100 of the 5,500 single family residences sold by Realtors in Montgomery County in 2009 were the result of a home foreclosure. That’s a disturbing 1 out of 5 homes. While this is a consistent ratio with the last several years, it is up from the 1 out of 7 homes in 2006, which is still too many.

If we dig into the 2009 numbers a little deeper, we find that Northeast Montgomery County, including Conroe, had the worst foreclosure experience. One out of three of the homes sold by Realtors in this area were foreclosures. Southeast Montgomery County had similar experience with about 1 out of 4 homes sold being foreclosures. Southwest County and Northwest County had the same experience with 1 out of 6 homes being foreclosures.

These rates are mirrored across the country and are at the core of our economic recession. The U.S. government has taken steps to help. The Home Affordable Modification Program was implemented to help homeowners facing foreclosure by reducing mortgage payments to qualified applicants. To reduce the number of future foreclosures, the House of Representatives has passed new legislation called the Consumer Financial Protection Agency. It now lies in the hands of the Senate, so its future is uncertain. If it is passed into law, it is hoped that the final bill will not only protect the consumer but will also not cripple the mortgage and housing industries.

While it is somewhat reassuring to know that our government is concerned about the high number of foreclosures, one can’t help but feel sad about the many good families who are facing, or have already gone through, a foreclosure. In the best of circumstances, it will take a long time to become eligible again to own a home. In the worst of circumstances, a family may never own their own home again.

Having said all that, without the foreclosure process, few of us would be able to get loans to purchase homes. Our housing industry depends on mortgage lenders and the mortgage industry depends on foreclosure laws to mitigate their risk and provide an effective backstop on possible losses. And finally, the buyers of foreclosures are an integral part of the foreclosure process. For without them, the lender would have no way to monetize their collateral.

Many people have found good opportunities in the purchase of foreclosed properties. Many foreclosures are attractively priced and are being bought up by first-time homebuyers, buyers trading up from existing homes, people moving to our area, and investors. As this article is being submitted, there are 200 foreclosures on the Montgomery County real estate market ranging in price from less than $50K to over $1 million. They exist in virtually every neighborhood and price range.

If you no longer are able to pay your mortgage, work with your lender, financial advisor and Realtor to understand your options. The stakes are high, so it is wise to be proactive rather than reactive. And if you are interested in exploring the foreclosure market, contact an experienced, local Realtor. There may be just the property out there that you have been waiting for.

You can contact me at 936-537-1656 or at Claudia@ClaudiaHohlt.com.