Housing Slump in Fort Collins area

[Charles]

Originally Posted by ncrea

Several factors - greedy lenders, escalating adjustable rate loans, people buying homes that had no business buying.

These factors are not unique to Colorado. The question I have is what is it about Colorado that puts it near the top of foreclosure lists?

[jazzlover]

A couple of things. Colorado's real estate market grossly overheated in the last several years. The "affordability index," that is the ability of people to afford their housing based on local income is not very good in many areas of the state. Homebuyers in Colorado, like everywhere else, got seduced by ARM's, subprime mortgages, home equity loans, etc., etc. In short, a lot of them of are "living on the edge," financially. So, the least disruption in the economy or employment can be catastrophic.

The other reason is Colorado's unique foreclosure system. So far as I know, it is the only state still to use a Public Trustee system. When a property goes into foreclosure in Colorado, the borrower has six months to "cure" the foreclosure--probably 75% of them are cured--by the borrower paying up the loan, the property being sold (before being sold at foreclosure sale), or the property being refinanced. My understanding from my Public Trustee friends in Colorado is that a foreclosure, when instituted, is counted into the state's foreclosure statistics, even though the property ultimately may not be sold at foreclosure sale. That appears to be different than most other states' methods of tallying the stats.

I don't think that anyone could say that the Colorado real estate market is "tanking" as of yet, but it shows just about every sign of a very "mature" market poised for a correction. The big question is how severe that correction will be. That will depend a lot on what the national economy does over the next few months, but I don't find the signs encouraging. Truth is, the Colorado real estate market desperately NEEDS a severe correction to bring it into line with the reality of affordability. But that is not just the case in Colorado, either. There are certainly plenty of overpriced real estate markets nationwide right now.

[Charles]

Originally Posted by jazzlover

A couple of things. Colorado's real estate market grossly overheated in the last several years. The "affordability index," that is the ability of people to afford their housing based on local income is not very good in many areas of the state. Homebuyers in Colorado, like everywhere else, got seduced by ARM's, subprime mortgages, home equity loans, etc., etc. In short, a lot of them of are "living on the edge," financially. So, the least disruption in the economy or employment can be catastrophic.

Not unique to Colorado. Almost all markets have appreciated. Colorado isn't even within 3dB of California appreciation.

Originally Posted by jazzlover

The other reason is Colorado's unique foreclosure system. So far as I know, it is the only state still to use a Public Trustee system. When a property goes into foreclosure in Colorado, the borrower has six months to "cure" the foreclosure--probably 75% of them are cured--by the borrower paying up the loan, the property being sold (before being sold at foreclosure sale), or the property being refinanced. My understanding from my Public Trustee friends in Colorado is that a foreclosure, when instituted, is counted into the state's foreclosure statistics, even though the property ultimately may not be sold at foreclosure sale. That appears to be different than most other states' methods of tallying the stats.

This may be it. If it is, then perhaps Colorado foreclosure isn't as big a problem as perceived.

No matter how bad everyone thinks it is in Colorado, it's a lot worse in California.