The Associated Press | Posted: Friday, May 19, 2006 12:00 am
DENVER (AP) - Colorado has posted the highest foreclosure rate in the nation for the second month in a row, the result of what one expert calls a "perfect storm" of factors that include debt, unsold homes and bankruptcies.
A report released Tuesday by RealtyTrac Inc. of Irvine, Calif., found 3,706 homes in Colorado were in foreclosure in April. That equals one of every 494 households; the national average is one in 1,268 households.
Texas had the most foreclosures, with 13,829 last month, according to RealtyTrac. That equates to one foreclosure for every 582 homes.
Colorado kept the top ranking even though the number of foreclosures dropped by 31 percent from March, when 5,392 homes were in foreclosure. Nationally, foreclosures fell 10 percent to 91,168 in April from 101,597 in March.
"There's a perfect storm" behind the high number of Colorado foreclosures, said Mary Wenke, public trustee of Arapahoe County. She said her office opened 436 foreclosure cases last month, compared with 288 in April 2005.
She cited a glut of unsold homes on the market, credit card debt held by homeowners, homes purchased without down payments and a record number of bankruptcies. She also noted that adjustable rate mortgages, whose interest rates are beginning to rise, will mean even more foreclosures in the months ahead.
"Home foreclosures are part of a vicious cycle," Wenke said. "You hear all of these figures that our economy is coming back and our unemployment rate is low, but this is the one sector that remains a huge problem."
Adams County continued to lead the state with the highest foreclosure rate, followed by Arapahoe, Denver and Weld counties. Adams County had 299 foreclosures initiated in April, down from 343 in March, county Public Trustee Jeannie Reeser said.
The bulk of the new foreclosures are from homeowners who used mortgages with adjustable interest rates to buy more home than they could otherwise afford, Reeser said. Rising interest rates are showing up in the form of higher payments.
"A lot of elderly, a lot of young people borrowed way too much. It is just devastating," she said.
Byron Koste, the head of the University of Colorado Real Estate Center, said rising foreclosures are a "caution flag for those who are saying we have recovered and we're back."
The problem is also contributing to market saturation, brokers say. A bigger inventory of homes for sale makes it even harder for sellers looking to get out of mortgage payments they can't afford.
"The problem is buyers who have tons of debt are getting mortgages that are too large for them," said Ben Fiedler, owner of Cherrywood Properties in the Denver area. "It is too easy to buy a home."
Paul Parker, who owns a We Buy Ugly Homes franchise, said he avoids foreclosure cases.
"Everyone assumes we buy foreclosures," Parker said. But only two of the approximate 100 homes his office has bought in the past four years were in foreclosure, he said.