Reality check on 2008 default filings for Wake county, NC

As a Wake county, NC investor, I am providing this follow-on to my last entry entitled "Real" 2008 foreclosure filings for Wake county, NC. I am supplying the number of substitute trustee (S-TR) filings in Wake county for 2008. Remember from the last blog entry that "real" foreclosure means a property that has gone through the complete foreclosure process and the clerk of court has filed a Foreclosure Notice as part of the final accounting. I am also providing S-TR filing data back through 2000 to get a better perspective on our local real estate market this decade. It turns out that in NC, these S-TR filings are a very good indicator of an impending court action (foreclosure) and power of sale. In basic terms, the S-TR filing is a good signal of a property heading into pre-foreclosure¹ although the Special Proceedings (SP) filing with the Clerk of Court is the de facto signal.

S-TR Filings	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2000	79	112	147	143	128	99	119	103	134	150	116	101	1431
2001	137	153	157	131	157	159	144	186	132	189	201	221	1967
2002	217	210	215	253	283	187	236	275	303	408	373	335	3295
2003	398	482	499	466	447	422	503	503	425	415	293	315	5168
2004	290	332	344	302	237	263	275	315	273	294	263	273	3461
2005	273	264	296	263	232	273	296	280	258	289	261	240	3225
2006	298	248	309	207	238	236	203	252	263	269	275	255	3053
2007	299	278	285	266	269	268	212	322	263	324	268	262	3316
2008	326	319	288	285	361	356	349	377	336	428	233	258	3916

All of this data, and the data in my last entry, are a matter of freely available public record. You can get the data from any of the 100 counties in NC and no data subscription is needed, although cumulating and organizing the data will be required.

So what does all this mean?

Simple. For Wake county, the "real" foreclosure rate and percent change are considerably lower than the collective media advertises. The following table shows the Foreclosure Rate as percentage of households², and compares³ the data from public record to data from RealtyTrac, one of the largest and well know sources for foreclosure data:

2007	"real" Foreclosures	"real" Foreclosure Rate	Foreclosures	Foreclosure Rate
public record	1,219	0.37	3,316	1.02
RealtyTrac	N/A	N/A	3,884	0.982

Of interest in the above table is the last column. The RealtyTrac numbers match up reasonably nicely with the county public record data. Indeed, this is what we would expect to happen even though RealtyTrac counts are by "metro area" and not by county borders. Note that Raleigh and Cary (RealtyTrac numbers are for Raleigh/Cary) are both substantially within the Wake county borders.

The following table show the percentage changes from the time periods indicated.

Percent change	"real" Foreclosure Rate	Foreclosure Rate
public record 2007 vs. 2006	3.9	8.6
public record 2008 vs. 2007	10.7	18.1
RealtyTrac 2007 vs. 2006	N/A	122.83

Just for fun, 2008 public record numbers look like this⁴:

2008	"real" Foreclosures	"real" Foreclosure Rate	Foreclosures	Foreclosure Rate
Wake Co. Households	1,349	0.41	3,916	1.20

Conclusions

I make the following conclusions:

1. RealtyTrac data regarding 2007 foreclosure rates per household (0.982%) are inconsistent with Wake county public record "real" foreclosure rates (0.37%)
2. RealtyTrac data regarding 2007 foreclosure rates per household (0.982%) are consistent with default rates in Wake county -- the public record S-TR rates (1.02%)
3. RealtyTrac year over year growth rates of 122% are inconsistent with public record changes in foreclosure, S-TR, and SP filings.
4. Investors should consider public records and trends when analyzing regional investment decisions, and compare multiple outside data sources to try to get a grip on reality.

Having the right regional information about the health of your real estate market is essential in making informed investment decisions.

References

1. North Carolina: New Rules re Trustee Representation, May 11, 2005, H. Terry Hutchens, Hutchens, Senter & Britton, P.A. — USFN Member (NC)

2. According to the Wake county web site, "The American Community Survey estimates that by 2006, Wake County had 325,712 housing units, an increase of nearly 66,000 housing units in six years." For this analysis we hold this 2006 number constant for all years.

3. Note that RealtyTrac numbers are by "metro area," not by county. The household sample size is different.

4. 1,349 "real" foreclosures in 2008 means only 1 household of 241 for the year experienced a foreclosure, or 0.41%. For 2007, the rate would be 1,219 in 325,712 or 0.37%.