Property seizures increase 43 percent in second quarter

By Richard Mize

Published: August 17, 2008

Foreclosures in Oklahoma are nowhere near the levels on the coasts and in formerly bubbly housing markets, but they're up and will continue to inch up for years, said a Realtor who specializes in the foreclosure market.

Credit tightening by private lenders, more waves of resetting adjustable-rate mortgages coming and increased down-payment requirements going into place for Federal Housing Administration-backed loans will prolong the national housing crisis, said Mary Berry, broker-owner of Century 21 All Pro Realty in south Oklahoma City.

"I think you're going to be looking at the end of 2011 or the beginning of 2012 before you see this thing level off,” said Berry, who has handled the sale of foreclosed houses for the U.S. Department of Housing and Urban Development since 1999.

Berry is known for a gloomy outlook that isn't surprising considering the kinds of properties she deals with daily. Her dark outlook is based on her own numbers — a 43.5 increase in total foreclosures through June compared with the same period last year.

Oklahoma's economy — mainly the energy business — is shielding the state from the brunt of the national housing crisis, but 48 states, including Oklahoma, and 95 of the top 100 cities in the country, including Oklahoma City and Tulsa, saw significant increases in foreclosure filings in the second quarter, according to RealtyTrac, which tracks U.S. foreclosures.

The foreclosure wave here started with homes under $100,000 bought with subprime loans, Berry said. By the end of last year, homes between $100,000 and $150,000 started going back to the bank or to HUD. Now, she said, mortgages for $200,000 and more — sometimes much more — are tumbling.

Berry just listed a foreclosure in Norman, a 9,600-square-foot home on 10 acres, that appraised at $2 million.

Compounding matters is the continued spread between appraisals and actual sales prices.

Berry said a broker price opinion — a BPO — for the Norman home was closer to its actual market value, $1.3 million. Why? It's a custom home built to the original owners' specifications. Among other unusual features, she said, it has only three bedrooms, too few to command top price considering the size of the place.

For repossessed HUD homes, the difference between the appraisal and market price can cause a home to linger on the market longer than it might otherwise, since HUD would rather let a home remain listed than take a loss, Berry said. She said appraisals came in at 124 percent of the amount actually paid for the 333 HUD homes she sold the first six months of the year.

Stan Miller, broker-owner of Century 21 Clinkenbeard Group in Muskogee and Fort Gibson, found a similar spread among the 321 HUD homes he sold through July: Appraisals came in at 118 percent of the amount actually paid.

Berry said appraisers are starting to be less generous in their estimation of HUD homes' values and that appraisals are starting to fall in line with broker price opinions.

Appraiser inspections tend to ignore the lack of maintenance, and sometimes deliberate damage, usually found in foreclosed homes, Berry said. A broker price opinion, she said, is based on comparisons with three similar homes that have sold and three similar homes currently listed but also considers condition of the home going on the market.

Whether the spread between appraisals and sale prices narrows or not, Berry sees signs of stress in the housing market here, even though Oklahoma as a whole stands out as bulwark of home value stability so far, even with increasing numbers of foreclosures hitting the market. Average and median prices calculated by the Oklahoma City Metro Association of Realtors include all homes listed with Realtors, including foreclosures.

"I see the market continuing to decline over the next few years,” Berry wrote in a midyear market summary. "Foreclosures are on the increase, market times are getting longer and the amount of properties that have sold has decreased every month over the last three months. There is an increase (in) the number of properties on the market these days and fewer qualified buyers.”

Miller said things were bad but wasn't so sure things were going to get worse.

"I think it'll be busy, unfortunately. I don't think we're going to get the big mess like the others are. I think we'll be pretty steady.”

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