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State's foreclosures fade to national background

By Ryan McMaken

Special to InsideRealEstateNews

Ryan McMaken of the Colorado Division of Housing notes that Colorado no longer is one of the worst markets in the U.S. for foreclosures.

In 2006, Realtytrac began reporting that Colorado was among the top three states with the highest foreclosure rates in the nation. By the end of 2007, national media outlets such as Time, NBC and USA Today were sending correspondents to Colorado to investigate what had gone so wrong with homeownership in Colorado.

Local statistics suggested a serious foreclosure problem as well.

When the Colorado Division of Housing began reporting foreclosure rates in 2007, foreclosure filings totals were found to have increased by 31 percent from 2005 to 2006, and 40 percent from 2006 to 2007. Foreclosure sales at auction increased by even more.

Politically, foreclosures became a hot-button issue as many began to suggest that Colorado was a hotbed for predatory lending and that other states had prevented foreclosure crises through more stringent regulatory regimes.

While the Realtytrac numbers likely overstated Colorado’s ranking among states, it is nevertheless likely that Colorado’s foreclosure rate exceeded the national rate during that period. We do know that in the Mortgage Bankers Association’s national delinquency report that Colorado’s rate for serious delinquencies and loans in foreclosure did indeed exceed the national rate during 2006 and most of 2007.

Colorado no longer alone dealing with foreclosures

By the time the financial crisis hit in 2008, though, foreclosures had established themselves as a national concern. The acceleration of the recession in late 2008 made it all the more obvious.

It’s not surprising then, that by the middle of 2009, reporters from the national media stopped calling and in spite of very little improvement in its overall foreclosure totals, Colorado found itself as just one of many states with high foreclosure rates.

In retrospect, we now know that Colorado’s delinquency and foreclosure rate fell below the national rate during the third quarter of 2007. Throughout 2008 and 2009, national delinquencies outpaced Colorado’s rate more and more each quarter. From 2008 to 2009, Colorado’s foreclosure totals actually declined while foreclosures in much of the nation moved quickly upward.

Foreclosure sales at auction, for example, fell 15 percent from 2007 to 2008, and then another 4 percent from 2008 to 2009.

During this time, Colorado fell from the top third of states in the delinquency survey to the bottom third. Nationally, the total percentage of loans that are seriously delinquent or in foreclosure peaked at 9.6 percent during the fourth quarter of 2009. In Colorado, the same measure peaked at 5.8 percent – only 60 percent of the national rate – during the same quarter.

Foreclosure trends “boring”

By 2009, one might say that Colorado’s foreclosure trends became boring. There was no reason to send a reporter to Colorado when Florida, in one famous case, could provide a story of an entire newly completed condominium high-rise with exactly one resident.

Nor is Colorado particularly special if we look at the other side of the foreclosure coin: falling home prices.

Case-Shiller shows Denver avoided boom-bust

According to Case-Shiller’s home price index, the Denver area’s home price index increased 22 percent from 2001 to the 2006 peak. The 20-city composite index, however, increased 83 percent during the same period. Since the peak, the Denver index has fallen 14 percent, while the 20-city index has fallen 33 percent. Some cities have seen much larges declines.

Relatively speaking, home prices in Colorado’s other metro areas were stable as well. In the Federal Housing and Finance Agency’s (FHFA) House Price Index, which includes indices for all of Colorado’s metro areas, we see that, with the exceptions of Grand Junction and Greeley, Colorado home prices have generally fallen 4 percent to 10 percent from peak levels. The national FHFA index has fallen by 14 percent since the peak. The Colorado index has fallen by 6 percent.

Colorado is also below the national average in the percentage of homes with negative equity. In the most recent CoreLogic report on negative equity, Colorado showed 20 percent of mortgages with negative equity, compared to the national rate of 22 percent.  Given the data on foreclosures, delinquencies and home prices available since 2008, it’s become difficult to make the case that there’s something special or unique about Colorado’s foreclosure situation when compared to the rest of the nation.

Ryan McMaken is spokesman for the Colorado Division of Housing. The opinions expressed in this column are his own and do not necessarily reflect the positions of the Division of Housing or the State of Colorado.