Steve Brown
March 4, 2008 
 
On weekends, Coppell real estate agent Tess Langevin loads up a bus full of potential homebuyers and heads out to look at foreclosed properties.

Ms. Langevin has plenty of homes to show.

There were more than 19,000 residential foreclosures in the Dallas-Fort Worth area last year. And thousands more houses are falling into default every month.

A study by The Dallas Morning News finds that the home foreclosure crisis cuts across all neighborhoods and economic classes in North Texas.

Lenders are understandably eager to get these houses sold before another batch hits their desk.

And the number of potential buyers for these properties is so strong, Ms. Langevin said, she is full up on her tours.

"We bought a 22-passenger bus and are full," she said. "We may have to rent another bus to follow behind us."

She’s also expanding to other areas. Last week, the foreclosure bus went to Carrollton and Lewisville, where home shoppers toured about eight properties.

"We are checking out North Dallas right now," Ms. Langevin said. "There are incredible properties there."

A close look at last year’s foreclosures reveals that the housing market troubles stretch from the most affluent in-town residential districts to the far suburbs.

"It’s in all areas of town and across all racial boundaries — it’s very scary," said Bonnie Mathias of Texas ACORN, the Association of Community Organizations for Reform Now.

ACORN is working with lenders and borrowers to try to keep people in their homes and avoid foreclosures.

The negative impact on neighborhoods is high, she said, if homes wind up being taken by the mortgage company.

Property values

"We end up with vacant houses in our neighborhood," Ms. Mathias said, "and that’s bringing down our property values."

Foreclosures in a neighborhood depress the value of surrounding houses and bring more crime.

Each individual foreclosure in a neighborhood reduces the value of surrounding houses by about 1 percent, according to research by the Fannie Mae Foundation. In areas where there are many foreclosures, the cumulative impact can be significant.

Other national forecasts predict that average home values will drop $5,000 in areas with foreclosures.

Each time foreclosures rise 1 percent, crime rises 2.33 percent in the neighborhood, according to a study by the Georgia Institute of Technology and Chicago’s Woodstock Institute.

Ms. Mathias said vandalism of empty foreclosed homes by copper thieves and squatters is a problem in some North Texas neighborhoods.

"The lenders have to be held responsible to keep the properties in repair and secured," she said. "They can’t just let it sit."

Obviously, some neighborhoods have been harder hit by the mortgage sector meltdown.

Based on last year’s foreclosures, the eastern and southern sectors of Dallas County have seen the largest numbers of lender sales.

But there were also big pockets of foreclosures in fast-growing northern suburbs including McKinney, Keller and Frisco, according to Addison-based Foreclosure Listing Service.

DeSoto hit worst

The worst area for foreclosures last year was ZIP code 75115 in DeSoto, which had more than 600 houses taken by lenders.

A U.S. Senate study found that Texas will probably lose almost $2.7 billion in property value due to subprime mortgage defaults.

Subprime loans make up less than 15 percent of the local mortgages, but they account for more than 50 percent of foreclosures.

And the Dallas-Fort Worth area is projected to take a $4 billion hit to its overall economy because of home foreclosures, predicts a recent report commissioned by U.S. Conference of Mayors.

Longtime Dallas real estate appraiser Jack Towers is already seeing the results of home foreclosures as he studies local property values.

"Most of the foreclosures I am seeing are in newer tract home neighborhoods," Mr. Towers said. "But it’s going to impact everyone one way or another."

Tougher loan standards and falling property values have also made it harder for borrowers who are in trouble to arrange new financing, he said.

"And if they can’t refinance, they are stuck," he said. "We are seeing a lot of people just walk away from their homes."

Mr. Towers said the scope of the home crisis has him worried.

"I’ve been though a couple of these things, and I don’t like this one at all," he said.

Tax appraisals

One area that won’t feel an immediate impact from local foreclosures is property tax valuations. That’s because tax appraisals often don’t include comparisons of foreclosed home sales prices in their value estimates.

"A foreclosure by its very definition is a forced sale, so you can’t really use that as an indication of the market," said Dallas real estate appraiser Chuck Dannis. "But if foreclosures are pervasive in the marketplace, then that becomes the market."

Eventually, tax appraisers will be forced include the data, he said.

"We are in unprecedented times with regards to this," Mr. Dannis said. "I would guess they are struggling."

In some neighborhoods, the majority of home sales are already foreclosures.

"For example, I have just prepared an inspection of a property in Cedar Hill for today and two of the three comparables are foreclosures," Mr. Towers said.

He said lenders are requiring that private appraisers include foreclosure resales when they value a property for mortgages.

"Yes, foreclosures are negatively impacting the market in many neighborhoods of this Dallas-Fort Worth market and by all indications will continue until the oversupply situation gets back in balance," Mr. Towers said.

That will take awhile.

In 2007, about 42,000 preowned houses were listed for sale in D-FW. More than 19,000 were foreclosure homes.

Real estate agents are seeing some steep discounts from lenders.

"We had one house on our last bus tour that was a $180,000 savings from the average in the neighborhood," Ms. Langevin said.

"Another was $65,000 off the comps."

If the weekly bus tours result in just one sale, she says, that will pay the cost.

"We are trying to stay alive as Realtors, get the economy going and get these houses sold," she said.

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