Skyrocketing foreclosure notices mean the slump in real estate prices and the subprime lending crisis aren’t going away soon, says Vincent Valvo, group publisher of The Warren Group.
During the first 24 days of 2008 there were 368 foreclosure notices for Rhode Island homes, which is almost a quarter of the total foreclosures in the state during 2006.
With seven days left in the month, January foreclosure notices were 66 percent higher than the 222 the Ocean State saw for all of the same month last year.
The increase jumps to 333 percent when compared with the 85 during January 2006, according to The Warren Group, which is based in Boston and publishes Banker & Tradesman.
“Yes, I think it’s going to get worse. The numbers as we’ve gone through the years have gotten higher in general,” Valvo told Providence Business News in an interview last month. “How much higher [they will be this year] is a question mark, but, if the November [2007] numbers are any indication, there could be anywhere from 50 percent to 100 percent over the prior year,” he said.
During November 2007, there were 417 foreclosure notices in the Ocean State, which was a 147-percent jump from the 169 during November 2006.
But month-to-month figures might not accurately portray the struggling market, Valvo said. One month might have more foreclosure notices for any number of reasons, including homeowners who have been negotiating with their lenders for several months.
“The bigger issue is looking month-over-month, but not just focusing on any particular month, and looking at the trends,” he said.
Overall, full-year foreclosure numbers gathered by The Warren Group in both Rhode Island and Bristol County, Mass., were far higher than they had been during 2006. Rhode Island’s foreclosure notices were 124-percent higher, from 1,509 to 3,386.
And Bristol County’s 2007 foreclosures were 114-percent higher, from 482 during 2006 to 1,031 last year.
The rate of change for Bristol County foreclosures was slightly less than the 119-percent increase that Massachusetts saw during 2007. Statewide, foreclosures jumped from 6,659 to 14,604.
“The trends clearly are that there are quite a few more – finishing the year at more than double the year before is a pretty ominous sign,” Valvo said.
He cited employment, consumer confidence, Wall Street and fluctuating interest rates as some of the factors that will determine the number of foreclosures this year. But the first and second quarters likely will be “very bad,” he said.
“That means you’re going to have a lot of foreclosure activity going on right at the time of the spring buying season,” Valvo said. “That’s not a good thing to have happening at your busiest real estate season of the year.”
The Rhode Island Association of Realtors doesn’t track foreclosure figures for the Ocean State, but President Rob Scaralia, of RE/MAX 1st Choice of Cranston, said the foreclosures will impact less than 1 percent of the state’s homeowners.
“It’s something that we have to get through,” he said. “Fortunately, we’re into this now and as time marches on the farther it will be behind us. That’s our take.”
During his 25 years in the Rhode Island market Scaralia said he has seen at least one time – during the 1980s – when there were similar market conditions.
Scaralia also cited homeowners who have taken “an ostrich mentality, not taking any action” when they fall behind on their payments. He said homeowners can always seek help from an agent or lender.
“The banks aren’t really in the real estate business, so they don’t necessarily want the houses back,” he said. “A lot of them are willing to work with folks, and that’s the good news.”
Valvo says that if the economy improves, there could be a rebound in real estate in the second half of the year.
“All real estate is cyclical,” he said. “It goes down and it comes back up. But we often forget that it goes down.” •
