Real Estate Foreclosures Are Surging In Loudoun

Regional Increase Far Outpaces U.S.

By Bill Brubaker (Contact)

Thursday, November 22, 2007

The number of recent home foreclosure filings in Loudoun, Fairfax and Prince William counties is up more than 600 percent from a year ago, a much higher increase than in the United States as a whole, according to a national real estate company.

Loudoun had the sharpest increase among the three counties, with 1,073 foreclosure filings in July, August and September, compared with 125 filings during the same period in 2006, a jump of 758 percent, according to RealtyTrac. The California-based company said those numbers represent filings in all phases of the foreclosure process, from the initial default notice sent to a borrower to the repossession by a bank.

Northern Virginia has been hit hard by the foreclosure crisis gripping the nation, largely because it once had one of the hottest real estate markets, experts say.

Borrowers with weak credit bought houses with risky high-interest, adjustable-rate loans. Now, with rates rising, some no longer can afford payments on those subprime loans. And with housing prices down across the Washington region, many cannot sell properties at a price that would enable them to even cover closing costs.

“Quite simply, the foreclosure issue is tied very closely to first-time home buyers who got in over their heads,” said Jeanette G. Newton, chief executive of the Dulles Area Association of Realtors, a Leesburg-based trade group. “The [higher] variable rates have now kicked in, and they just can’t afford the mortgage payments.”

Photo: Michael Williamson

Experts say Northern Virginia has been hit hard by the foreclosure crisis largely because it once had one of the hottest real estate markets in the country. This photo shows development in the once-rural Brambleton area near the height of the real estate boom in 2005. (File photo)

Foreclosures are especially evident in communities with lower-price houses, such as Sterling Park and Sugarland Run in eastern Loudoun, Newton said.

As in Loudoun, the third-quarter spike in foreclosure filings in Fairfax and Prince William far exceeded the increase of 100 percent across the country, RealtyTrac data showed.

The jump was 694 percent in Fairfax, from 229 filings in the third quarter of 2006 to 1,818 in the same period this year. Prince William filings rose 624 percent, from 212 to 1,535.

Across the United States, foreclosure filings were reported on 446,726 properties during the third quarter of this year, RealtyTrac officials said. Nevada, California and Florida had the highest foreclosure rates in the quarter, as measured by filings per household.

“Although not all areas are being hit as hard as others, the rise in foreclosures is quite widespread, with 45 out of the 50 states documenting year-over-year increases in the third quarter,” James J. Saccacio, the company’s chief executive, said in a statement. “Given the number of loans due to reset through the middle of 2008, and the continuing weakness in house sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets.”

Houses in foreclosure generally sell for about 20 percent less than those in the traditional market, which pushes down the value of nearby houses, according to the Center for Responsible Lending, a North Carolina-based nonprofit research group.

The group predicts that 1.1 million Virginia houses will lose $4.2 billion in value as a result of the record number of foreclosures expected. In Loudoun, that would mean that about 29,000 houses would lose about $179 million in value. In Fairfax, about 221,000 houses would be worth $1.2 billion less. And in Prince William, the value of 83,000 houses would be cut by $463 million.

Last week, Virginia Gov. Timothy M. Kaine (D) formed a task force of mortgage industry officials, housing consumer advocates, policy experts and others to study and address the crisis.

“Many of Virginia’s working families are facing significant difficulty as mortgage rates adjust,” Kaine said. “My goal is to have policies in place that will help Virginians before they are faced with foreclosure.”

Dozens of advertisements for foreclosed Northern Virginia houses have been posted on real estate agents’ Web sites.

One ad early this week offered a three-bedroom, two-bathroom single-family house in Sterling for $325,000. Another trumpeted a four-bedroom, three-bathroom house in Centreville for $356,500.

“Most of the people running into trouble either can’t make their payments or are being forced to sell for some reason or another,” Newton said. “You know, they may have taken a new job or they have to relocate. Or they are being forced to sell in an economy where they are not going to make any money on their homes, and they have to bring money to the table to sell their houses, and they just don’t have the money.”

Newton said there’s an upside to the crisis. “There is more inventory of properties and the interest rates are low,” she said. “It really is a good time to buy as long as you are looking for a long-term home investment.”

In Loudoun, the median price of a house was $414,000 in October, down from $427,950 in October 2006, according to Metropolitan Regional Information Systems, an industry research company.

“If people can hold on to their homes, they are going to be okay,” Newton said. “The market is going to come back. The market always does come back.”

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