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Foreclosure forecast is dim

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Russ Kashian

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Paula Carrier

Foreclosure filings on Walworth County homes could jump nearly 11 percent this year, a bad indicator for the middle class, the group that's struggling to keep up with mortgage payments.

The trend appears to contradict talk this summer that the housing market was turning around and the recession subsiding.

In neighboring Rock County, however, foreclosure filings for this year appear to be slowing from 2009, provided the housing recovery doesn't further fracture.

Russell Kashian, a local economic analyst, said he expects foreclosures to spike at the end of the year as large banks clear their books of bad debt.

Kashian, a professor, is director of the Fiscal and Economic Research Center at UW-Whitewater.

Banks file quarterly reports with the federal government, and there is pressure on lending institutions to balance their books, Kashian said. As an example, third-quarter spikes in foreclosure filings happened in Walworth County in 2008, 2009 and this year, according to numbers from foreclosurealarm.com.

Walworth County foreclosure filings totaled 635 for the first three quarters of 2010, surpassing the 607 filings for the same period last year, a 4.6 percent increase.

On average, foreclosures were filed against 70.5 Walworth County homes monthly this year compared to 63 homes monthly in 2009.

If the upward trend continues this year, 846 Walworth County homes will face foreclosure proceedings by the end of December, compared to 759 in 2009, a potential leap of 11.4 percent.

Compare the potential 846 figure to the total 2008 filings of 509; foreclosures during the two-year period could jump nearly 44 percent.

In neighboring Rock County, monthly filings averaged 81.9 in 2008, climbed to 104.3 in 2009 and declined to 97.2 in the first three quarters of 2010, according to numbers from foreclosurealarm.com.

Ryan Simons, treasurer of Lakes Area Realtors Association, said the largest economic group hit by foreclosures is two-income couples with mortgages on ranch-style, starter homes.

One of the income earners often loses a job and either can't find employment or takes a job with less pay.

"It is economic-related in terms as to why it's happening," he said. "The people being hurt are two-income earners who were in a position to purchase the home. One homeowner lost an income and took some time to replace it. They got behind on payments and could not catch up.

"Some lost 25 percent to 30 percent value in the home. It fell so far that some people just walked away."

Simons said the realty market is now flooded with "bread and butter homes"—ranches with three bedrooms and two baths.

Paula Carrier, past president of Rock Green Realtors Association, agreed with Simons' analysis.

"It's mostly the middle class," Carrier said. "Those who moved into $80,000 to $150,000 homes seem to be the core focus of foreclosure."

Carrier said that when she became a Realtor 26 years ago, she dealt with maybe one foreclosure a year. Now, every day brings a new foreclosure to her office. Carrier said Rock County numbers might be in decline because of support agencies that are in place to stop foreclosures.

Simons, a Realtor, is manager of Keefe Real Estate in Delavan. Carrier is with Best Realty of Edgerton.

Few lake properties fall into foreclosure Simons said. Some are due to over extended home equity loans and others to job loss.

Kashian said the surplus of foreclosed homes is slowing the recovery because there is so much available and so few buying.

"It used to be that you were encouraged to buy as much home as you could because the value never goes down," Simons said. "That proved to be false, and people are now under water."