Housing foreclosures in region spiked in October

Foreclosure activity in Hampton Roads spiked last month and has increased nearly threefold since a year ago as banks took over more homes and homeowners across the region struggled to pay mortgages, a report to be released today found.

The number of foreclosure-related notices in Hampton Roads was 1,155 in October, up 25 percent from September and 191 percent from year-ago levels, according to RealtyTrac, an online foreclosure-monitoring service based in Irvine, Calif.

The service tracks the number of bank repossessions, auctions of foreclosed homes and notices of default, which mark the beginning of the foreclosure process.

The pace of foreclosure activity in Hampton Roads is higher than it is nationwide. Foreclosures were up 5 percent in October from September and 25 percent from October 2007 across the country.

One out of every 516 homes in the region was in some state of foreclosure last month. While the number of properties in foreclosure fell in October to 183 from 227 a month earlier, default notices nearly doubled to 608. The spikes were most dramatic in Hampton, Portsmouth and Suffolk, all of which had an increase in foreclosure activity of more than 400 percent.

"I think we're just looking at the tip of the iceberg," said James Koch, an economist and president emeritus at Old Dominion University. "If housing prices continue to deteriorate, and I expect they will, we're likely to see the foreclosure rate go up substantially."

He predicts that homeowners in increasing numbers will walk away from homes for which they owe more than the property's value.

Median prices for new and existing homes in the region continued to fall in September. The median price for an existing home was $218,500 in September, down 5.4 percent from August and 2.8 percent from September 2007, according to the region's local multiple listing service. Meanwhile, the median price for a new home was $284,500 in September, down 17 percent from the same month last year.

Koch's opinion that the region may face even more housing trouble was supported by another report released Wednesday by Zillow.com, which tracks home values nationwide.

In its quarterly survey, Zillow.com estimated that 15.7 percent of those who bought homes in the Virginia Beach-Norfolk-Newport News metropolitan statistical area in the past five years are "underwater" on their mortgages, owing more than their home is worth.

For those in the area who bought their home this year, the picture is even bleaker: 34.5 percent owe more than the home's value. The metro area's rate is the highest in the country for homes purchased this year, according to Zillow.com.

Being "underwater" in a home mortgage is seen as a precursor to foreclosure, said Katie Curnutte, a spokeswoman for Zillow.com. "That could mean that the worst hasn't been seen in that area yet."

Curnutte said housing prices in Hampton Roads peaked in 2007, a year after the rest of the nation, which suggests the general downturn has taken longer to reach the area. The firm estimates that home values in Hampton Roads are down 5.3 percent in the past year.

Koch said he expects to see foreclosure activity double or triple in the coming year.

The new foreclosure data are being released two days after the federal government announced a plan to help more homeowners avoid foreclosure.

The plan focuses on loans backed by Fannie Mae and Freddie Mac. A borrower would have to be at least three months behind on payments and owe at least 90 percent of what the home is worth to qualify. Borrowers could see their interest rates reduced and the term of their loans extended to make payments more affordable.

But the program may be a little too late, said Kevin Harris, a housing counselor and lending consultant for Community Housing Partners in Virginia Beach.

"A lot of people are upside down. It's pretty bad," Harris said. "We get a lot of people calling due to loss of income, possibly having been laid off from a job. I definitely think it's a reflection of the economy."

In October, the Federal Housing Administration rolled out Hope for Homeowners, a plan aimed at helping those at risk of default and foreclosure to refinance their loans. Some critics say lenders won't participate, because they have to voluntarily reduce the value of a loan, resulting in a loss.

Harris has had little luck with the program so far, and the number of homeowners calling his office worried about foreclosure has easily doubled in the past few months, he said.

"We're finding that a lot of people are literally calling when they are four or five or six months behind, and those are the people who are very hard to help," he said. "As soon as you know you're going to have trouble with your mortgage, before you're even behind, give us a call."

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com