Sedgwick County foreclosures continue to fall from their 2010 peak – a trend that is likely to continue, experts say.
Foreclosures are down 8.4 percent so far this year compared with the same period of 2011, and down 23.1 percent from the same period of 2010.
In fact, the number of foreclosures this year is close to the number in early 2007, the start of the subprime mortgage bubble.
That reflects the fact that Wichita’s housing market is tied directly to the underlying economy, and both are slowly improving, said Stan Longhofer, director of Wichita State University’s Center for Real Estate.
“The foreclosure situation here is not being driven by problems with exotic mortgages, but more by employment,” he said. “So, it started rising later here and is moderating because the employment situation isn’t getting any worse.”
Daren Blomquist, vice president of real estate tracking firm RealtyTrac, agreed that Wichita’s foreclosure mess is probably on its way down permanently.
But that’s not true nationwide, he said, where housing is still in worse shape than the economy as a whole – and his company expects foreclosures nationwide to go back up this year.
After slowing for the past 18 months, the nation’s largest banks have accelerated their push to foreclose on delinquent borrowers. Many of these banks had halted foreclosures after getting caught in the 2010 robo-signing scandal in which they improperly filed foreclosures on untold thousands of homes.
Blomquist said the impact will be felt most in states with both a large backlog of delinquent loans and a requirement that foreclosures go before a judge. Top on the list is Florida, which saw a 60 percent drop in foreclosures in 2011. Also likely to see big increases are New Jersey, Pennsylvania and Maryland, he said. The worst states for foreclosures – Nevada, Arizona and California – will remain high but won’t see a significant new surge, Blomquist said.
The drop in foreclosures in Wichita is good news for the housing market as a whole, Longhofer said. Fewer foreclosures should add some demand for regular homes.
But, he said, it will be years before the area sees a housing market balanced between supply and demand. Longhofer said the area has a large shadow inventory: the thousands of homeowners who wanted to sell over the past four years, but didn’t list their house because the market was so bad. As demand revives, that supply will keep hitting the market, holding prices down and hurting new home construction.
It will take time to fix, but at least Wichita’s market is functioning properly, he said.
“If you look at the pattern, it’s a slow but steady upward track,” he said. “That is good for restoring a sense that things are OK in the market.”