The 'Walking Dead' Housing Recovery - Zombie Foreclosures

Tyler Durden's picture

With the mainstream media becoming increasingly worked up about the pending real-estate 'parabolic' surge and 'now is the time to buy', the reality of 'zombie foreclosures' and 'foreclosure stuffing' that we discussed six months ago continues to grow. While most prefer to ignore inventory as an issue (apart from Bob Shiller and Karl Case who have adamantly refused to 'bless' this 'exuberant' housing recovery), knowing full well that at some point these huge volumes of vacated but still 'owned' homes must come to market (once the foreclosure process picks up). The reality is that with Nevada, Kentucky, Maine, and Indiana having over 50% of homes in vacant foreclosure, there is plenty of supply to come (and with it the accompanying downward pressure on prices)...

Karl Case pours a little cold water on the ebullience of the nascent housing recovery hopers - once again due to the foreclosure and auction process...



Via Las Vegas Review Journal,

Delays in the foreclosure process are leaving thousands of Nevada homes vulnerable to vandalism and deterioration, an executive for RealtyTrac said Thursday.


Roughly half of foreclosed homes in Nevada are “zombie foreclosures,” or properties flagged as vacant or abandoned, said Daren Blomquist, vice president for the Irvine, Calif.-based online listing service.


In many cases the delinquent owner vacated the home expecting it to go to foreclosure, and may not realize the property has yet to be scheduled for trustee sale, he said.


That means the homeowner is still responsible for - but not paying - maintenance and property taxes.


Kentucky was identified as having 54 percent vacant foreclosures, followed by Indiana and Maine at 53 percent.




Rick Phillips, president of FTN Financial Main Street Advisors, said “zombie foreclosures” are definitely a material problem for Las Vegas and will put downward pressure on home prices.


He also expects to see prices decline if Nevada’s robo-signing law is revised in the Legislature.


Florida leads the nation with 90,556 owner-vacated foreclosures. Illinois is next with 31,668, followed by California with 28,821 and Ohio with 17,367. Nevada is No. 13, with 6,070 vacant foreclosures.




The inventory of U.S. homes in foreclosure rose 9 percent in the first quarter, although Nevada saw a 30 percent decrease, the foreclosure analyst said.


The annual increase in national foreclosure inventory was caused by a 59 percent jump in preforeclosure inventory, or properties that received a notice of default. Inventory of homes scheduled for foreclosure auction decreased 25 percent and the inventory of bank-owned homes decreased 3 percent.


One figure that stood out for Nevada is the 22 percent increase in “front end” inventory, or homes that have received a notice of default, Blomquist said. It’s up 22 percent from a year ago, to nearly 10,000 as of mid-March.


RealtyTrac reported a 69 percent decrease in notices of trustee sale for the first quarter in Nevada, and a 31 percent drop in back-owned homes, or actual foreclosures.


The so-called “shadow inventory” of homes that have entered the foreclosure process but have not yet been listed for sale may provide hope in markets hungry for more inventory, Blomquist said.


Many of those properties will be listed as short sales in the next six to 12 months, or they’ll go through foreclosure and eventually come on the market as bank-owned properties in the next 18 months, he said.

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HelluvaEngineer's picture

Make sure to check out our "Zero Down, No Intent to Pay" mortgage, starting at 1.75% APR for the first 36 months!

TeamDepends's picture

Zero down?  Give us some of that "cash-back" love.  Or maybe a BMW.

css1971's picture

Cool. Back to market crash levels.

Rubbish's picture

I will die soon so I don't need a home, I need a nurse and a daily spanking !

fourchan's picture

10s of thousands of 3 bedroom brick homes here in detroit are going without a bid at a 10000$

ask. its rediculous, you could buy 10 solid construction 1950's houses for 100k.

augustusgloop's picture

what is cramping detroit's recovery is the overhang of gov debt.  the city (and state) need to declare a jubilee and wipe the slate clean. city would be in for a renassance--hipsters / artists drawn to good architecture, entrepreneurs drawn to excellent infrastructure... 

Missiondweller's picture

Not until they get rid of their union deadweight.


SnobGobbler's picture

wheeew! i thought no bid at $40k was bad (house across street sold for 32k) i still owe 130k (north of detroit)

CrashisOptimistic's picture


Back to the 1980s, with 30 million additional buyers at mortgage rates a fraction of what they were then.

There is no recovery.  There are only lies.

Handful of Dust's picture

I visited my brother in north central texas for Easter and we drove around.....he spotted 6 more foreclosures....Big McMansions no less. Quite a few empty houses with no 'For Sale' signs in front so who knows when they will hit the market. Lots of collapsed fences and unmowed lawns. Evidently some of these central Texas areas have become largely rental slums with absentee landlords.


Sad stuff. Used to be nice out there. The only sign I saw as "Sign of the Times."

DoChenRollingBearing's picture

Yet, "they say" that real estate is coming back, prices up recently and all.  Realtors, mortgage brokers, and others in peripheral lines of work in my city.

I will stay in gold & silver.

wee-weed up's picture

Yep, Obama's sycophant MSM has been trying to hype a pending real-estate surge since a few months after his inaguration. Then the folks in the real-estate business take the lie and run with it... lather, rinse, repeat... ad nauseum.

Temporalist's picture

Most recently I've heard of homes becoming vacant in groups (new For Sale signs without occupants) and foreclosured "residents" (who used to be called squatters I guess) waiting for the bank and sheriff to evict them ostensibly.   FL, AZ, where else?  The "money on the sidelines" has already purchased into the RE and those were/are cash buyers, asset holders and excellent credit.  With high unemployment, stagnant incomes and low savings how are people going to buy a new home unless prices decline?


I have a picture of this never ending cycle in my mind:

Sell the American Real Estate Dream

Politicians/economists say everyone deserves a home

People with poor credit are given lax loans with little due diligence to buy homes

People with no credit and no job buy homes

RE agents, banks, politicians, appraisers and assessors collude to make money off lax lending

Defaults and fraud start system collapse

People lose lots of money after bidding up RE prices

Lending dries up

The Fed sustains the bubble for "wealth effect" and starts to blow another with "liquidity measures"

Sell the American Real Estate Dream

Politicians/economists say everyone deserves a home

People with poor credit are given lax loans with little due diligence to buy homes


PlausibleDenial's picture

For all those  new "investors" hoping to cash in on rent streams, I ask if they did the due diligence in terms of being able to increase their rents to meet growth in inflation.  This particularly true for those individuals that cannot qualify for a mortgage and still experiencing stagnant wages. Also, in terms of due diligence, I wonder how many investors understand the horrific tax hit of deprecation recapture currently @25%.  "Damn that traffic jam":)

duo's picture

The only sure thing in rental real estate is property that cash flows on Section 8 vouchers, assuming that your rent won't be paid one month out of three (while you evict the deadbeat).  Prices still have to go down more.

This is the only way to play the Ponzi if you're not in banking, RE, or medicine (or WalMart).  The Fed prints money to give to people to pay rent, and you collect it.

CheapBastard's picture

Sectoion 8's are penetrating everything and everywhere (not to mention the 'zero-down' crowd. My old Hood was very nice. I drove by other day to check my old house on the golf course .....a Section 8'er is living there....I bet the neighbors feel warm and fuzzy about that, esp the beaten up, purple jalopy in the driveway. "Mov'n on up!" is the new slogan along with H&C.



Croesus's picture

@ DoChen:

Pop Quiz Time:

Which one is most likely telling the truth?

A) "Yes, it's coming back, and Happy Times are here to stay.....I sell them, so I know!". - Realtors and Stockbrokers

B) "It's FUBAR, and getting worse, so buy MOAR Phyzz".- Gold Market Commentators

C) "It's going to go to $100,000, and we'll all be rich. There's only going to be 21M of them" - The Bitcoiners


DoChenRollingBearing's picture

Realtors and Stockbrokers, nice putting them into the same basket!


The answer is B.

I am too old to mess with Bitcoins, but I wish them well.

Citium's picture

@DoChen - I am a realtor in Texas and while our state never felt too much of a downside to real estate in 2008-2009 I know that this article is dead on. I only sell farm land in Texas and stay away from houses as much as I can. I do all land because atleast then I feel like I am providing possible land to sustain life after the crash. The only real estate right now I would personally buy would be a zero to low debt farmland or wooded land buy.


There seems to be a bubble building in farmland throughout most of the country selling for 10 to 20 thousand PER ACRE, which in  most states is around a 50-100% hike in less than 2 years. But here in Texas I can sell land for 2 to 3 thousand an acre or roughly about what it was bringing before the crash as land values in texas have stayed mostly uniform.

DoChenRollingBearing's picture

+ 1 for interesting & timely Texas land info.


I used to own a small piece of raw land in Goliad County.  It was 90% covered with Live Oak, had a pond on it, was fenced and along a paved county road.  In terms of inflation, your $2000 - $3000 / acre would be about what I paid in 1979 or so...

I guess my only observation would be that Texas is more prone to drought than the Iowas, Ohios and Missouris.

Texas...   :)

SmittyinLA's picture

I read TX has more "bullshit bond debt" than CA, specifically those bonds that roll over principal & interest for 25-30 years  

So while all the rednecks laugh at spendthrift CA you let your state get looted by Mexicans.

Shocking I know, you didn't know you had a stealth Mexican invasion financing op did ya? 

That growth aint free dude!

Panafrican Funktron Robot's picture

The one thing Texas does have is boatloads of gold.  I could definitely see Texas outliving the US.

Citium's picture

@SmittyinLA - I let it happen? I'm sure I let it happen as much as you let California become an oppressive, broke state... How come anytime someone mentions Texas there is a Northerner or Californian chiming in on rednecks and how bad Texas sucks? Did I say anything bad about California?

* There are a lot people leaving California and moving to Tx as more people have moved here since 2008 than moved to california during the dust bowl. Which is fine but the problem is we don't really like having you guys come in with  your liberal attitude and big government proclivities.

Also some interesting facts about Texas Economy:

1. Over the past five years, Texas has added 275% more net new jobs than all other job-adding states combined.

2. Texas would be the 15th largest economy in the world if it became it's own country again.

3. Texas is where 537,500, or 73.4%, of America's net new jobs have been created over the past five years; this figure is nearly ten times greater than the second place Louisiana (55,900, or 7.6% of America's total).

4. Texas' population grew by 11 million people (79 percent) between 1980 and 2011, more than double the rate of growth of the nation as a whole.

5. Texas accounts for only about 8% of the nation's population but 16.5% of U.S. exports.

CheapBastard's picture

My uncle is a Texan. I love when he goes fishing...never catches ANYTHING under 50 pounds (he says).


Lucky guy!

californiagirl's picture

Back in 2006/2007, there used to be an average of 250 homes on the MLS listing in my Silicon Valley zip code.  Now, in a good month, there are 60.  Almost everyone around here is talking about a housing boom as prices are driven up through competing offers.  The County government loves it because their Property Tax revenues are climbing, and the banks can "justify" to their auditors that there is no reason to take reserves on those non-performing loans because look how high the market values of the properties are!  So, as long as the banks cooperate and keep the NPLs on their books, avoiding official foreclosures, the artificially-supply-restricted prices can keep climbing, low loan-loss reserves can be justified, governments can grow their revenues, and we can all be delusionally happy about the booming real estate recovery!

kareninca's picture

That's exactly what I'm seeing.  Listings in Silicon Valley are way, way down.  E.g.  Redwood City: there is no inventory!  I can't believe that people there are still paying their boom-time mortgages.  They HAVE to be staying on, mortgage free.  But I don't have any hard evidence.

waterhorse's picture

It's a multi-headed hydra, which head do we shoot?

Lendo's picture

Wow, not good.

I'm sure NAR and the other spin doctors say this is good news.

redpill's picture

They'll be sitting there for a long time, banks don't want to foreclose, and since they get free money from Bernanke they don't need to.

williambanzai7's picture

These properties will eventually be rented to newly minted MBAs by private equity firms.

Freddie's picture

The United States has become a zombie country being destroyed by an ineligible usurper Islamic zombie.

css1971's picture

See Japan for 20 year vision of the future.

DoChenRollingBearing's picture

Worse future than that.  Take Freddie's comments AND yours for a fuller picture.

Gold, bitchez.

McMolotov's picture

Mother of God! Japanese Islamic Zombies?!


cossack55's picture

Worse.   Glowing Japanese Islamic Zombies.

Joseph Jones's picture

I get your sentiment, and Obunga needs to be legally charged, convicted, and well, I won't print what I really want for fear.

But you can't really believe a guy who states USA has "unbreakable bond with Israel" and "everlasting support" for Israel (Synagogue of Satan) is a Muslim? 

Panafrican Funktron Robot's picture

This is actually a pretty good point.  He is probably much closer to a Satanist than anything else.  

just a dude's picture

The United States has become a zombie country being destroyed by an ineligible usurper Islamic zombie following his orders.

Fixed it for you.

W74's picture

Pretty sure it's the Nazi-onists though.  Then the blax.  Then the chicanos.  Islamics come in a distant 4th.

e-recep's picture

"The United States has become a zombie country being destroyed by an ineligible usurper Islamic zombie."

you have been here for quite some time now and you haven't even grasped the fact that the nigger is just a frontman??

NEOSERF's picture

Fed has implictly licensed the banks to not mark to market anything for as long as it takes...until Fannie, Freddie are fixed, expect nothing but rosy forecasts and sales numbers.

californiagirl's picture

But they are "marking to market". By not foreclosing on NPLs and restricting supply so that competing offers drive prices up, they are artifically creating new market highs to justify lower reserves.  I suspect that this strategy has been planned with the full support of the FED and governments. Never mind the looming NPL inventory. 

Al Huxley's picture

There are many fine properties like these available all over America, but they're going fast!  buy now, before it's too late!,MI/price;a_sort/


Al Huxley's picture

...and thanks to the power of the internet, you can now tour your new neighborhood before you move in - meet the neighbors, find the local watering holes, pick out the schools for your kids.  HURRY HURRY!

W74's picture

God, and to think that all those homes were once filled with beautiful White families where kids walked to school and parents felt safe letting them play freely around the block.  That was probably in an era before the schools were simply free-lunch daycare centers though.  Mein Gott, there are only mere remnants of civilization.

Devils Advocate's picture

No Doubt I live in the burbs outside the D and get to drive by these beauties!! However, with the low interest rate and the fact that anyone can get a mortgage again the suburbs here in the hot demanded markets have extremely low inventory levels and there is bidding wars for any move in ready home....I feel sorry for the people who beleive they need to rush out and buy before prices move up even higher as they are being told this by every realtor and the media...I see the beginning of the reinflated housing bubble 2.0 right before my very eyes.

Joe Davola's picture

If King Jong Un would target Detroit he could wipe out about $10,000 worth of real estate in one fell swoop!