Foreclosures Begin to Hit Home

By Beacon Staff

Prompted by news of the subprime mortgage crisis and soaring foreclosure rates, several callers a day contact Kalispell’s Century 21 Home and Investment Center asking for information on foreclosed homes in the Flathead Valley. The response – given national forecasts – isn’t what they’re expecting.

“People call with the idea that one, there’s going to be a bunch of them and two, that they’re give-away prices,” broker Mary Kay Myett said. “Neither one is true.”

That’s not to say there are no foreclosures in the area. In fact, with 252 foreclosures, Flathead County had the highest foreclosure rate of any county in the state last year, according to real estate data from RealtyTrac. That also meant a 66 percent jump over 2006’s 152 foreclosed homes. Numbers from the Flathead County Clerk and Recorder’s Office are lower – 164 notices of trustee sale and 29 actual sales.

Local real estate professionals are short on answers for why Flathead would outpace other Montana counties with foreclosures, suggesting only that the incredible boom in growth in the past decade would naturally lend itself to an increase in foreclosures as well.

Nationally, numbers were much more intimidating in a year marked by a fragile national real estate market. In 2007, RealtyTrac reported a total of 2,203,295 foreclosure filings – up 75 percent from 2006. At the end of the year, the Office of Federal Housing Enterprise Oversight reported that home prices in the country showed a quarterly decline for the first time in 13 years. New home sales showed a dramatic decrease.

But, area economists and realtors caution that while local increases are noteworthy, there’s no reason for panic: All real estate markets are local and the situation in Flathead, and Montana, is far from dire.

While, so far this year, 47 notices of trustee sale have been posted with the Flathead County Clerk and Recorder’s Office, experts said notices are not the same thing as actual foreclosures. Given what local realtors call a still-healthy real estate market, it’s likely that a lot of these homes may be recovered or sold before they go to auction.

The state as a whole saw an increase in foreclosures – up 29 percent from last year – but is clocking only around one foreclosure filing for every 30,000 households, a rate that places it 36th in the nation and confirms observations by local agents that the market here is slowing but still among the country’s healthiest.

“Is it quieter than it was? Yes, way quieter,” Myett said. “But, to the point where a lot of foreclosures are on the market? No.”

Paul Polzin, director of the Bureau of Business and Economic Research at the University of Montana, said Flathead’s foreclosure rate was “way above” rural, eastern parts of the state and comparable to larger, more metropolitan areas like Boise and Spokane. Still, he said, Flathead and the state don’t compare to the worst-hit locales.

“We have not avoided the foreclosure problems or the housing price bubble bursting, but they do seem less severe in this area,” he said.

There is a kickback effect from struggling areas though, as people looking to relocate to Flathead County struggle to sell their current homes in lesser markets. Myett said she had several clients – one from Detroit where a more than 4 percent foreclosure rate puts it among the nation’s three worst markets – stuck in that situation.

Realtors also noted that things may get worse in the local market before they get better since some homeowners with adjustable rates have yet to leave the introductory period and see their rates spike.

“One of the things looking out over the next few years is that we may still see more foreclosures as some more people get into trouble as they adjust up and can’t afford their new rates,” Myett said. “If the market remains healthy though, they’ll hopefully be able to put their house up and sell and get out from under that.”