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State’s foreclosure rate 15th highest

June 12, 2009
By ANDREW GOMES, The Honolulu Advertiser

A steady rise in Hawaii foreclosure filings propelled the state to its worst national ranking to date in May, according to a report by real estate research firm RealtyTrac.

Hawaii had the 15th highest number of foreclosure filings per household last month among the 50 states.

It was the worst showing for Hawaii since RealtyTrac began collecting and reporting data in January 2005, and was only the second time Hawaii was among the 20 worst states. It was 20th in September.

There were 816 foreclosure filings statewide last month, or one for every 621 households.

That was still better than the national average of one filing for every 398 households.

The total Hawaii filings for May represented a roughly fivefold increase over 164 filings in the same month last year, and was the highest number of filings for any previous month after 724 in March.

Hawaii's worsening national position began late last year, in contrast with the state's previous position among the 10 states with the lowest rate of foreclosures.

However, some local foreclosure attorneys and real estate experts question the accuracy of RealtyTrac's reports because the company includes commercial property in its count.

That has a significant impact in Hawaii because of the state's sizable number of condotels and time-share units, many of which have faced foreclosure.

Additionally, RealtyTrac doesn't collect data from some rural areas, which may give states with big rural populations lower rankings. California-based RealtyTrac said it collects data from more than 2,200 counties nationwide, representing about 90 percent of the U.S. population.

Part of the reason for Hawaii foreclosure filings growing faster than other states in recent months is that housing markets in other states crashed earlier and now are faring better, while Hawaii's housing market has experienced a moderate downturn that is still building modestly.

In RealtyTrac's report, May foreclosure filings dropped in 18 states compared with a year earlier, which helped limit the overall number of filings nationally to an 18 percent increase.

Hawaii's rate of increase, at 398 percent, was the biggest of any state.

The consensus from local economists and foreclosure attorneys is that foreclosures in Hawaii are growing, as the decline in property values and deflated home sales have made avoiding foreclosure harder for people who can't pay or refinance their mortgage in a recession that has included widespread cuts in wages and jobs.

The state jobless rate in April was 6.9 percent, hovering around levels not seen in 30 years. May unemployment figures haven't been released yet.

The gloomy employment picture hasn't only had an impact on foreclosures. Hawaii bankruptcies rose 62 percent in May to 250 filings, up from 154 in the same month last year.

A January report by the Pew Center for Responsible Lending predicts there will be 18,600 homes lost through foreclosure in Hawaii over the next four years, including 5,600 this year. The four-year projection equates to an average of 388 a month.

Some observers expect the situation to turn significantly worse if state workers are forced to take furloughs that effectively reduce their pay by 13.8 percent in each of the next two fiscal years.

Despite the challenges, some solace can be read into RealtyTrac's foreclosure filings because not every filing results in a homeowner losing their home.

For instance, some homeowners may receive a foreclosure notice and resolve the problem, perhaps by paying the default, restructuring the loan or selling the home before foreclosure auction.

A case like that would represent one filing counted by RealtyTrac. But the company also counts filings on properties for which there may have been another type of filing counted in a prior month.

RealtyTrac counts default notices, trustee sale notices and repossession purchases by lenders. So if a homeowner loses a home at foreclosure auction, the property could be counted three times in different months - first as a default notice, then as a trustee sale notice and then again if the lender acquires the property in what's called a real-estate-owned transaction.

Of Hawaii's 816 foreclosure filings last month, 279 were default notices, 476 were trustee sale notices and 61 were lender repossessions.

By county, Honolulu had the highest overall number of filings at 399, but the lowest rate per households at one filing per 839 households.

The Big Island had 168 filings, or one per 462 households. Maui had 171 filings, or one per 380 households. Kauai had 78 filings, or one per 374 households.

 
 

 

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