The nation’s housing market is on the mend. In many neighborhoods the only problem is lack of inventory for sale. And then there is a starker, darker reality: 127,021 homes nationally are what real estate data company RealtyTrac calls zombies, and that is one in every four homes in the foreclosure process. They are strangling neighborhoods, even some towns.
A zombie happens when the homeowner has packed up and moved out — but the mortgage holder has not taken title to the property. What that means is that, usually, all maintenance stops. Lawns aren’t mowed. Snowy sidewalks are not shoveled. Broken window panes are not replaced. Thieves may steal the piping, wiring, sometimes even appliances. Squatters may occupy the dwelling. The house very quickly becomes an eyesore – and a rule of real estate thumb is just one derelict eyesore on a block can ruin the whole block. And a few in a neighborhood can lower the property values throughout the community.
Don’t think the brisk housing market has cured the zombie problem. RealtyTrac numbers make clear this continues to be a huge issue – in at least some areas of some states.
Don’t hunt for zombies in Carnegie Hill, Manhattan or Santa Monica, Calif. or anywhere in San Francisco. There are none. Faramarz Moeen-Ziai, a senior vice president at Commerce Home Mortgage, San Ramon, Calif, said that in the metropolitan California markets where his company is active – the San Francisco area and Los Angeles – zombies just are not the issue they were perhaps six years ago. As homebuyers have emerged in those markets, even homes that might need TLC have gotten snapped up.
But then there is another America.
According to RealtyTrac, in Maine 37% of the homes in the foreclosure process are zombies. In New Mexico it is 30%. In Florida — 35%. In Delaware — 32%. Indiana — 33%. Iowa and Nevada — 34% each. Kentucky: 38%. Kansas has zombie homes in a staggering 42% of its foreclosures. In Oregon, it is a jaw-dropping 46%. Take note of those ten states if you are contemplating buying a home in one of them. You may want to do a rethink.
Moeen-Ziai’s observation: where time on market for homes for sale is measured in days (think San Francisco), there is no zombie issue. When it is measured in months, perhaps even years, the story is different.
But here’s the worrying part: some parts of the country are likely to have zombie home problems for some time to come. Maybe indefinitely. These are places where would be buyers need to beware.
“In certain markets, zombies are a big problem,” said Daren Blomquist, a vice president at RealtyTrac. He said there are two, very different causes that create different zombie problems.
The first type is where zombies are an unintentional byproduct of laws, typically laws designed to protect consumers. Case in point: New Jersey, which, per RealtyTrac, has a 24% zombie rate. That is anomalous, because in most of the state the housing sales market is brisk. Why so many zombies? “The foreclosure process in New Jersey is lengthy,” said Blomquist. “Houses can linger in the process for many years.” By one count, it takes on average 1033 days to finally foreclose in New Jersey. That’s the nation’s slowest. New York, in second place, takes on average 986 days.
According to Blomquist it is easy to see how to fix the zombie problem in states where it’s a function of the political process: “fix the foreclosure process, make it more efficient.” He acknowledged that is ”easier said than done.”
In New York, he said, there is a push in the state capital to enact legislation that would require mortgage lenders to maintain a home even before they officially file foreclosure papers. Other states and cities have taken similar actions and – in the states where due process has spawned zombies – the numbers of neglected homes appear to be diminishing.
But there is another, more problematic cause of zombies with no obvious fix.
“Some markets have seen population flight,” said Blomquist. “In markets with non-existent buyers, zombies can be a big issue.” He pointed to Cleveland as a classic for instance, but plenty of struggling cities in otherwise prosperous states — Camden, N.J. (greater Philadelphia clocks 27% zombie foreclosures and Camden comes in higher); Baltimore (32% are zombies); and St. Louis(36% are zombies per RealtyTrac) — are in a similar downward spiral. As for a possible fix for these kinds of zombies, “maybe the solution is just to demolish a lot of homes,” said Blomquist.
Detroit (26% zombies) for instance may demolish some 40,000 homes, mainly homes in poor condition, in neighborhoods where buyers are unlikely to emerge.
“There won’t be easy solutions to the zombie home issue,” said Blomquist. That means: buyers really need to beware because entire neighborhoods – possibly whole cities – just may see anemic home appreciation for years to come as zombie eat their future.