Foreclosures in Wake County are surging – up 425% from a year ago

Dated: September 14 2022

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Foreclosures in Wake County are surging – up 425% from a year ago-----Four days ago this headline splashed over our TV screens in the Raleigh-Cary Market. Since Covid lockdowns for 2020 there has been a LOT of talk about a foreclosure wave coming.

Let's be honest, 425% YOY increase sounds like a LOT.  But is it really? Let’s examine the facts. There was still a federal moratorium that hadn't yet expired by this time last year, therefore there was no ability to file. Second, there are various reasons why a 3rd party might sell real property via the courts. It could be to satisfy a county, state, or federal tax lien. It could be to satisfy a judgment like in the case of divorce for example where the two parties cannot agree. It could be to settle an estate, where the person is deceased without a will or is no longer able to execute their own affairs, etc., think about aging parents who need memory care, and these types of sales happen ALL the time.

To be fair, the only involuntary sales that really matter for the sake of this discussion is mortgage foreclosures which in Wake County are included with HOA foreclosures because they are directly tied to the performance, or lack thereof the homeowners promise to pay.

There's a board in the Wake County Courthouse on the 12th floor of the Special Proceedings court where these foreclosures are processed. On that board are the sales that are currently available for sale and those recently sold Today there was 10. Let that sink in.



There are nearly 500,000 housing units in Wake County, and it is the most populated county in our state with ~1.4 million persons calling it home with 67 new net residents arriving here daily. There are only ten active judicial sales today!


Consider also that most the case numbers on that board are from years gone by. The leading two-digit number represents the year of the initial case filing. As you can see, very few are from 2022. Meaning these are lagging foreclosure cases that were postponed for one reason or another. Wake County also happens to be the wealthiest in the state with the highest per capita income meaning there is no shortage of persons who can afford to buy housing in this market. In other words, its unlikely that most of these early foreclosure notices mentioned in the article will result in an actual foreclosure.

Finally, for those comparing or hoping this will look like ’08, don’t hold your breath. The Wall Street Journal Reform and Consumer Protection Act of 2010, another bill named for what it did not do, made significant reforms to the mortgage industry. Specifically, it put a greater emphasis on the credit quality of the borrower and a greater risk to the originator who ignored the rules.

The Covid lockdowns of 2020 were the real-life stress test of the quality of the vintage loans originated in the post mortgage reform era. And you know what else it told us? It told us the quality of post 2011 borrower underwriting is superior! According to Blackknight, the largest servicer of mortgages in the US, 97% of those who took the mortgage deferral continued to make their mortgage payments!

Will housing prices correct themselves? Of course, they will, but don’t expect monumental discounts either because if you bought your house in the last three years, you really don’t have much room to go down much lower than you paid for it. Conversely, sellers who have large equity positions are in very good positions and have little motivation to move due to the velvet handcuffs of their sub 3% mortgage rates.

 

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Ricardo Cobos

With a background in real estate since 1996 Ricardo earned his broker’s license in 2015 and quickly became both a top producer and a leader in his market center by working exclusively with inves....

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