Zombie Foreclosures Climb Los Angeles Real Estate Market
and other major cities, as banks push troubled homes through the foreclosure process to take advantage of higher prices, according to data released Thursday.
These foreclosures, involving homes vacated by owners, rose over the past year in half of the 183 metro areas followed by online foreclosure marketplace and data provider RealtyTrac. In the Los Angeles metro area, zombie foreclosures jumped 39% over the past year to almost 1,900 at the end of the second quarter, while in the Houston metro area they leapt 38% to 442.
“Banks realize that because of this seller’s market, they can get top dollar, even for the scratch-and-dent properties that foreclosures represent,” said Daren Blomquist, vice president at RealtyTrac. “That gives them more motivation to push through even some of the tough foreclosure cases that had lingered in the process longer.”
Meanwhile, more zombie foreclosures in certain states reflect an increase in foreclosures starts in areas where it takes a long time to move through the process.
The growing number of zombie foreclosures in certain metro areas contrasts with the strengthening national housing market. Zombie foreclosures throughout the U.S. fell to about 127,000 at the end of the second quarter — making up about one in five of properties in foreclosure — down 10% from a year earlier.
It’s been years since the housing bubble burst (one popular measure says home prices in major cities started falling in mid-2006). A growing labor market and economy have helped some struggling homeowners, as have modified loans. Meanwhile, state and local lawmakers have enacted plans to speed up the foreclosure process or to use land banks to acquire troubled properties.
Zombie properties cause a variety of problems. The empty homes frequently devolve into eyesores, hitting neighborhood property values. Banks don’t like them because the loans are non-performing assets. And governments miss out on tax revenue.
The national zombie-foreclosure rate shows that one in every 1,040 homes was owner-vacated and in the foreclosure process at the end of the second quarter. An area with a relatively large number of troubled properties was New Jersey’s Atlantic City, where casinos are struggling and one in every 130 homes was a zombie foreclosure.
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