Foreclosures, bankruptcies still battering home sales

NORFOLK

Foreclosures continue to hamper the recovery of the Hampton Roads housing market and weigh down home values throughout the region, real estate experts said Wednesday.

While the number of new foreclosures has been falling in recent months, the filings remain near historic highs.

That has resulted in hundreds of distressed properties hitting the sales market in recent years, bringing down prices and preventing the region from regaining its footing, the experts told scores of residential real estate workers at a forum at Old Dominion University Wednesday afternoon.

"Distressed sales have become a significant part of the market," said Vinod Agarwal, an economist at Old Dominion University.

Sales of foreclosures as a percentage of the overall sales market in Hampton Roads hit a high in February of about 43 percent, according to multiple listing service figures and Old Dominion's economic forecasting project.

Agarwal said growing foreclosure sales, in addition to a high supply of homes on the market, have eroded home values in the region. Median home prices year-to-date are down nearly 11 percent compared with the same time last year.

In part, rising foreclosures can be attributed to a fading stigma associated with filing for bankruptcy or defaulting on a mortgage, other experts at the forum said.

Some of that is a result of borrowers these days typically not knowing their lender personally, said Michael Seiler, a real estate professor at Old Dominion University.

As large bankruptcies of public companies have gotten more attention in recent years, the perception among individuals has grown that filing for bankruptcy is normal, said Frank J. Santoro, a judge in the U.S. Bankruptcy Court's Eastern District of Virginia.

"If it's acceptable for General Motors, if it's acceptable for Joe Blow, why isn't it acceptable for me?" he said.

Despite the decline in home prices in recent years, the drop has brought home values in line with where they would have been under normal housing appreciation of 4 percent annually, said Van Rose, president of the new homes division of Rose & Womble Realty Co.

Rose pointed to a decline in the amount of inventory on the market as evidence of the housing market improving and added that he expects further improvement in the years to come.

"I think Hampton Roads has some hope in the days ahead," he said.

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