Spokane Journal of Business

Foreclosures climbed in Spokane County last year

County tallies record defaults despite gains in home sales

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Foreclosure actions completed in Spokane County swelled to a record level in 2013 following a four-year low in 2012, despite other indicators of improving real estate market trends.

Last year, the Spokane County Auditor’s Office recorded 1,211 foreclosures on deeds of trust, up 77 percent from 685 foreclosures in 2012. The 2013 total also was 9 percent above the previous record, which was set at 1,112 foreclosures on deeds of trust in 2011.

A deed of trust is a pledge of real property that secures a mortgage.

Rob Higgins, executive vice president of the Spokane Association of Realtors, says the 2013 rise in numbers is somewhat surprising because the home-sales market has been improving during the last couple of years.

The total number of homes sold through the Multiple Listing Service in 2013 was 5,499, up a strong 21 percent from 4,533 homes sold in 2012.

Higgins says 18.8 percent of home sales through the MLS were distressed sales, compared with 20.5 percent in 2012. The respective percentages, though, equates to 1,034 distressed home sales in 2013, up from 929 a year earlier, meaning there were actually 11 percent more distressed sales in 2013 than a year earlier.

Distressed properties include foreclosed, bank-owned, and short-sale properties, which are sold under urgent conditions, usually below market value.

Higgins says he believes distressed sales are holding back home prices.

“Although the number of houses sold showed quite an increase, prices didn’t move that much,” he says.

The median sales price of homes sold through the Spokane MLS in 2013 was $164,700, an increase of only 3 percent compared with home sales prices in 2012. By comparison, home sales prices in the 20 largest metro markets in the U.S. were up 11 percent in 2013, Higgins says.

Not all homes that are subject to foreclosures on deeds of trust show up in MLS data, he says.

Auction sales, for instance, only show up in real estate data when the sales involve real estate agents.

“Investors buy some properties directly,” he adds.

He says the dip the number of foreclosures on deeds of trust in 2012 might have been because of foreclosure delays rather than improving economic conditions.

“Those numbers indicate something was going on that slowed down the foreclosure process,” Higgins says. “A lot of banks were holding off because of litigation nationally.”

Maya Murphy, a Spokane-area real estate investor who, with her husband David, buys distressed properties, says overall market fundamentals are improving, which might be encouraging lenders to complete foreclosures and sell bank-owned properties, rather than holding onto them for extended periods of time.

“It would make sense to me that banks are allowing properties to hit the market,” Murphy says.

Phil Kuharski, a longtime Spokane economic data tracker and active member of the Spokane-Kootenai Real Estate Research Committee, says a number of foreclosures had been held in limbo as rules were changed to help aid homeowners.

“This was sort of a second-wave effect of the foreclosure problem that happened in 2008 and 2009,” Kuharski says, adding that the current wave might not be subsiding yet. “I think the crest is a good two years,” he says. 

Kuharski says he figures 10 percent to 15 percent of Spokane-area homes have debts greater than their value.

“There are still quite a few houses underwater,” he says.

Population, jobs, and income, all of which are trending relatively flat here, are holding back the housing market, Kuharski asserts.

Patrick Jones, executive director of the Institute for Public Policy and Economic Analysis at Eastern Washington University, says foreclosures on deeds of trust don’t paint the total foreclosure picture, because those numbers don’t include preliminary foreclosure actions that don’t result in foreclosures on deeds of trust.

Jones says he prefers to work with a broader brush, which includes state and national foreclosure rates.

“The foreclosure rate here is still relatively low,” he says.

CoreLogic, a California-based real estate data service, recently reported that the foreclosure rate in the Spokane area for the first 10 months of 2013 was 1.78 percent and trending downward. That compares favorably to foreclosure rates of 1.80 percent for all of Washington state, and 2.15 percent nationwide. The rates include properties in all stages of the foreclosure process.

The CoreLogic data show, however, that the Spokane-area foreclosure rates for each of the first seven months of 2013 were higher than the year-earlier months.

Mike McLean
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Deputy Editor Mike McLean has worked his entire journalism career in the Inland Northwest. Mike, who also lives to reel in fish and crank up music, has worked for the Journal since 2006.

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