As we anticipated in our post last month, we are already beginning to see signs of resurging foreclosure activity in 2012 as lenders slowly but surely speed up their foreclosure practices and procedures.
Within the greater Washington, D.C., metro area, this is true more so in Maryland than Virginia, corresponding to the bigger drop-off in Maryland foreclosure activity last year as a result of robo-signing scandal — which hit in October 2010.
Initial default notices that start the foreclosure process in Maryland increased 100 percent in January 2012 compared to January 2011, the third straight month of year-over-year increases in default notices. Virginiascheduled auctions, the first public notice of foreclosure in that state, increased 12 percent in January 2012 compared to January 2011 — the first year-over-year increase after 14 consecutive months of year-over-year decreases.
(Image below taken from RealtyTrac’s database)
Maryland’s more bureaucratic quasi-judicial foreclosure process seems to be more susceptible to foreclosure processing delays than the more laissez-faire non-judicial foreclosure process in Virginia. Of course one could also argue that the Virginia process is more susceptible to foreclosure processing abuses by lenders.
We expect the trend of increasing foreclosure activity to accelerate over the next couple months because of the recent foreclosure settlement between state attorneys general and five of the nation’s biggest lenders.
Bigger percentage increases in foreclosure activity in Maryland could in turn weigh down home prices there more than Virginia, something a recent Bloomberg article picked up on. The article juxtaposed the real estate market in two Washington, D.C., counties: Fairfax County, Va., and Montgomery County, Md. The counties are very similar in size and demographics, but home prices in Fairfax County have increased 26 percent from a bottom in January 2009, while home prices in Montgomery County have increased less than half that much, up 12 percent from a bottom in January 2011, according to the Bloomberg article.
The thesis of the article is that a faster foreclosure process has helped the Fairfax County market to more quickly clear its distressed inventory, allowing home prices to bottom out and start heading higher sooner than in Montgomery County, where the slower foreclosure process weighed down home prices longer. Of course it helps that the Washington, D.C. market is relatively strong compared to other markets. Unemployment rates in both Fairfax and Montgomery are well below the national average, and there has not been a strong home price recovery in areas like Las Vegas, Nev., and Stockton, Calif., even though both those metros are in states with a non-judicial foreclosure process.
A quick search on RealtyTrac found two high-end bank-owned properties for sale, one in Fairfax County and one in Montgomery County. Although the property in Montgomery County is slightly larger, with 7 bedrooms and 9,110 square feet, it was priced 47 percent lower than the Fairfax County property, which has 6 bedrooms and 7,197 square feet. While other factors likely figure into the disparate listing prices, the faster-recovering home prices in Fairfax County — and by extension the more streamlined foreclosure process in Virginia — may certainly play a part.