Good News & BAD News on Colorado Foreclosures

The new Colorado Foreclosure filings were up 23 percent higher during the 1st quarter in 2008 compared to the 1st quarter 2007, with the most home foreclosure rates found in Adams County and Weld County. Filings are NOT actual foreclosures, they are the initial notifications to cure the defaulting loan after the homeowner doesn't make 3 payments in a row. Read the full report below...

Fortunately, popular cities like Littleton real estate and Highlands Ranch real estate have very low foreclosures, keeping these markets selling strong in MOST neighborhoods.

What are the Top 3 Causes of Foreclosures in Colorado?

The #1 problem causing foreclosures (which is ALSO the #1 problem causing bankruptcies) is that home buyers are NOT financially responsible. The majority of this responsibility results when home buyers do NOT live within their financial 'means' after they buy the house, as statistics show that these same home buyers drastically increase their overall debt after purchasing the house. It has very little to do with the loan or interest rate they closed with, instead, it is that the home buyers begin to spend beyond their financial means and can't get caught up.

The #2 problem causing foreclosures is that about 40% of ALL foreclosures were a direct result of a home buyer buying a new home builders home - and getting a mortgage loan from the new home builders mortgage lender. The misconception is that 'predatory lenders' are causing the high foreclosures - when the statistics clearly show that new home builder's have the highest percentage of defaulting foreclosure homes. The interesting 'fact' drawn by this statistic is that MOST home foreclosures are occurring with first-time buyers, minorities and people with very little financial sense or financial experience...(and their in NO way to regulate financial irresponsibility or stupidity.)

The #3 problem causing home foreclosures is "bad circumstances" that occurred for home buyers. This includes a job lose by a spouse, an illness, medical situation, accident or divorce. These 'causes' can happen to anyone, and cannot be predicted (unlike the #1 and #2 causes) and are just an unfortunate situation. Of these, a prolonged job loss and income loss is the most common situation leading to a foreclosure.

Editorial: The biggest issue causing foreclosures right now in Colorado is homeowners not being financially responsible AFTER buying their home, i.e. - that they 'rack-up' a ton of extra debt buying cars, boats, atv's and running up credit cards buying stuff for their new homes AFTER qualifying for the mortgage loan at a MUCH LOWER debt ratio. Then, they just get behind when many of their adjustable or sub-prime loans adjust upwards by $200-$800...they can't pay all their NEW bills. See more about buying foreclosures here.

Foreclosure Report:
According to the Colorado Division of Housing, there were 11,630 new foreclosure filings during the 1st quarter, compared to 9,443 for the same period last year. There were 39,915 foreclosure filings reported during 2007. Foreclosure filings increased 6 percent since the 1st quarter of 2007, climbing from 10,955 during the 4th quarter to 11,630 during the first quarter this year.
Statewide, there was one foreclosure filing for every 159 households, with the highest foreclosure rates found in the Denver metro area and in Weld County and Adams County. Adams County had the highest foreclosure rate with one foreclosure filing for every 86 households, while Weld County showed one foreclosure filing for every 102 households. According to the study, foreclosure filings for 2008 are likely to be 15 percent higher than 2007 totals. Foreclosure filings increased 30 percent during 2006, and 40 percent during 2007.

Yet, while filings increased by 23 percent - ACTUAL Foreclosure Sales at auction only increased 5 percent year-over-year during the first quarter. In this Realtors professional opinion, the 5 percent is not a dramatic increase - not enough to even raise much of a concern, as these foreclosure numbers were predicted to happen. Foreclosure sales occur when a foreclosed home is actually SOLD to the lender or a third party. During the 1st quarter, there were 5,875 foreclosure sales, compared to 5,586 for the same period last year. There were a total of 25,320 actual foreclosure sales during 2007.

Unfortunately, according to the report, Douglas County and El Paso County experienced the most growth in new foreclosure filings. Douglas County's filings were 78 percent higher during the first quarter of 2008 than during the same period in 2007. Foreclosure filings in El Paso County were 47 percent higher during this year's 1st quarter than last year's.