VOL. 124 | NO. 138 | Thursday, July 16, 2009
Q2 Foreclosures Down in Home Sector, But Up Overall
By Andy Meek
TAKING STEPS: Local government bodies have begun addressing the foreclosure problem in Memphis and Shelby County, with a City Council resolution recently asking that foreclosure be considered in property value appeals. Shown from left are councilmen Jim Strickland and Shea Flinn. -- PHOTO BY LANCE MURPHEY
The foreclosure of major properties that dot the Memphis skyline in the second quarter capped a mixed three-month period for local real estate, when the economic slump dragged many properties to the edge.
Park National Bank, lender for the 31-story One Commerce Square Building at 40 S. Main St., bought that property at a foreclosure sale for $20 million after the office building headed to the auction block in May. Capital One, the main lender for the 16-story Horizon at 717 Riverside Drive, bought the residential tower at a foreclosure sale for $17.4 million.
Such attention-grabbing defaults by property developers and owners came during a quarter when evidence of the painful recession remained clearly visible in the varying stages of foreclosure in the local market.
The problem is identified with a single word, but it can refer to one of several occurrences – the original foreclosure notice, a lender seizing a property and the sale of that property to a new owner. All of those stages help gauge the scope of the problem.
Foreclosure and bankruptcy
From April 1-June 30, the number of foreclosure notices generated in Shelby County saw a 14 percent bump, going from 3,078 during Q2 2008 to 3,513 in the same period this year, according to real estate information company Chandler Reports, www.chandlerreports.com.
Residential property seizures saw a noticeable drop-off during the quarter, falling from 1,636 in Q2 2008 to 1,300 this year.
The number of sales by banks disposing of those seized properties neither improved nor worsened during the quarter, inching down to 1,551 from last year’s total of 1,576.
The Downtown properties auctioned recently were among 30 commercial foreclosure seizures during the second quarter of the year, down from the 53 seizures during Q2 2008. Since January, 53 commercial properties have been foreclosed this year.
“Foreclosures don’t just happen in any one neighborhood, and it’s not something that happens overnight,” Shelby County Assessor of Property Cheyenne Johnson said last week at a Shelby County Commission committee meeting. “It’s a process that takes place for a variety of reasons.”
Some of those reasons – such as a bankruptcy filing – line up almost in tandem with the areas of the city hardest hit by foreclosures. With a few exceptions, the 10 Shelby ZIP codes that saw the highest number of foreclosures in the second quarter matches up almost exactly with the 10 ZIPs where bankruptcy filings were most prevalent.
Good intentions gone bad
Another of the local foreclosure storylines that began to pick up steam in the quarter is a burgeoning response to the problem by local government bodies.
At last week’s Memphis City Council meeting, councilman Kemp Conrad introduced a resolution encouraging the local Board of Equalization to take foreclosures into account when hearing property appeals from the 2009 reappraisal.
“A lot of home sales in Memphis and Shelby County are due to foreclosures and bank sales, and the assessor cannot take those into account when (the staff) is doing valuation,” Conrad said. “So what that means is, especially in these hard-hit areas, you have a lot of homes that are selling for a lot less, but the assessor by state law can’t take that into account. … But if you take those out, you’ve got lots of people paying taxes at inflated values.”
The total volume of bank sales, as well as the number of some of the most frequently foreclosed loans, such as conventional fixed rates and conventional adjustable rates, all went down during the quarter.
Bank sales volume dropped about 14 percent, falling from almost $107 million during Q2 2008 to a little more than $92 million during the same period this year. During that same period, the number of properties with conventional adjustable rate mortgages dropped from 330 (Q2 2008) to 154 (Q2 2009).
Foreclosures of properties with conventional fixed-rate mortgages slipped from 299 (Q2 2008) to 263 (Q2 2009).
“Being in the business, you see a lot of things in the marketplace,” said Shelby County commissioner James Harvey at a presentation to a commission committee last week. “People now want to look at it as something that’s occurred that was illegal.
“But it’s really not illegal when you find a product that has been approved through the federal government as a program that would be fitting to the community to expand the housing ownership of common people that are working on their jobs every day.
“Now we have overdone that concept, and we’re all paying for it.”