A Few Words about Foreclosures in the D.C. Area

Six months ago, I wrote an article about foreclosures, concluding that they were not a big problem in the D.C. and Northern Virginia area. (SEE Foreclosure Scare – Foreclosures, Foreclosures Everywhere? Not Really in D.C. and Northern Virginia).

In that article, I quoted data showing that “The D.C. metro area averaged only 8 foreclosures per 10,000 households in the 3rd quarter of 2006.” Well, since then foreclosure rates have doubled to a rate of 16 per 10,000 households during the first quarter of 2007.

While still much lower than the national average and most of the country, the fact is that foreclosures are very serious for the people whose homes are at stake and who may have fallen victim to unscrupulous lending practices and who were encouraged by poor advice to purchase more than they could afford.

Fellow Northern Virginia Realtor Frank Llosa recently wrote an excellent article examining foreclosure rates in different areas of Northern Virginia. It's the old adage, "Location, Location, Location." Real estate is very local. In Llosa's analysis, while up to 48% of listed homes in Herndon are in some stage of foreclosure, Arlington only has 2-4% of the homes on the MLS in foreclosure, and in tony McLean there are only 5 foreclosure listings.

The Washington Business Journal recently interviewed several regional real estate experts about their thoughts on the market. Here are some of their quotes regarding whether the increase in foreclosures poses a significant threat to the housing market:

STEPHEN FULLER (Director, Center for Regional Analysis at George Mason University): “This is not a significant problem in the Washington area. Its mortgage foreclosure rate of 16 to 10,000 households is the lowest in the nation among major metro areas and less than half the national rate of 38 per 10,000. The number [of homeowners] affected by subprime and variable rate loans is a very small percentage.”

BOB KETTLER (Chairman, McLean-based real estate developer Kettler): “[W]e see that job growth remains strong and stable, suggesting a fallout is less likely to persist in the long term compared to regions with chronic economic challenges.”

LAWRENCE YUN (Senior Economist, National Association of Realtors): “Foreclosures are very painful for those involved…[I]n the aggregate, the inventory additions from the subprime foreclosures will be about 5 percent to the existing inventory. The underlying job market strength can easily absorb the rise in foreclosures.”