Halloween may be only a few weeks away, but the U.S. housing market is well on its way to being zombie-free, according to RealtyTrac’s U.S. Zombie Foreclosure and Vacant Property Report for the third quarter.
A “zombie foreclosure” happens when a homeowner moves out of the home after foreclosure proceedings have started, but then the foreclosure is held up in some way or canceled, leaving the title in the homeowner’s name. Zombie foreclosures occur frequently in low-income areas where lenders are reluctant to assume responsibility for the upkeep of the property or other costs associated with the foreclosure. In some cases, lenders write off the property, leaving it in severe disrepair or open to squatters.
But according to RealtyTrac’s report, this phenomenon is on the decline. The report, released today, shows that 20,050 properties were vacant zombie homes at the end of the third quarter.
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That’s a decrease of 27 percent since the second quarter, and 43 percent from the same quarter last year, RealtyTrac said.
“Zombie foreclosures continue to limp along on their way to the final reckoning,” said Mark Hughes, chief operating officer at First Team Real Estate, which covers the Southern California market, in response to the report. “Uncared for, these lifeless shells are a scary eyesore to any would-be seller as they scare buyers interested in nice neighbors away.”
Overall, there are 1.5 million vacant properties across the country, and zombie homes only account for 1.3 percent of them, RealtyTrac said. Bank-owned homes accounted for another 1.9 percent of all vacant properties, another 36.5 percent have at least one open loan, and 6.2 percent are seriously underwater.
“Zombie foreclosures continue to limp along on their way to the final reckoning. Uncared for, these lifeless shells are a scary eyesore to any would be seller as they scare buyers interested in nice neighbors away.” – Mark Hughes, chief operating officer at First Team Real Estate
RealtyTrac Vice President Daren Blomquist said the downward trend in zombie homes is not a surprise, considering that overall inventory of homes in the foreclosure process has dropped 36 percent over the last year.
But what is surprising is that there are so many vacant homes whose homeowners do not appear to be in any financial distress.
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“More than 63 percent of these vacant homes are not even encumbered by a loan, owned free and clear by the owner,” Blomquist said. “The fact that the homeowners are not selling given the recovering real estate market in most areas indicates that many of these properties are in poor condition and in neighborhoods that have been left behind by the housing recovery.”
Hughes advised home sellers who may live near a zombie foreclosure or vacant property to locate the lender and lean on them to clean up, secure and make the homes safe.
“It may be worth it for sellers to send a lawn crew over to spruce up the yard at times to help with curb appeal,” Hughes pointed out.
According to the report, states still suffering the most from the zombie plague are:
- New Jersey (3,997 homes)
- Florida (3,512 homes)
- New York (3,365 homes)
- Illinois (1,187 homes)
- Ohio (1,028 homes)
Metropolitan areas that are still experiencing the most zombie foreclosures are New York (3,531 homes), Philadelphia (1,610 homes), Chicago (989 homes), Tampa (984 homes) and Miami (866 homes).
Notably, the South Florida market had been suffering for some time, but “the zombie foreclosure crisis has for all practical purposes evaporated in South Florida,” said Mike Pappas, CEO and president of the Keyes Company, which covers that market.
“We have seen this number drop precipitously over the past few years. Due to our strong second home and international buyer market, we do have a large number of properties that are not always occupied, but are well maintained,” Pappas said.
Some states have less than a 1-percent share of vacant residential properties:
- South Dakota (0.3 percent)
- New Hampshire (0.4 percent)
- Vermont (0.5 percent)
- North Dakota (0.5 percent)
- Montana (0.8 percent)
- Washington (1.1 percent)
But a handful of states actually bucked the national trend and posted year-over-year increases in zombie foreclosures: Boston (up 61 percent); Worcester, Massachusetts (up 43 percent); St. Louis (up 16 percent); Philadelphia (up 15 percent); and Trenton, New Jersey (up 11 percent), according to the report.