Colorado's fast and furious foreclosure action has finally cooled.

The number of foreclosures in the state fell last year - the first time that has happened since the Colorado Division of Housing began collecting data in 2003.

Last year saw a 2 percent drop in foreclosure filings - the beginning of the process of losing your home - and a 16 percent drop in foreclosure sales - the final step. That's a far cry from 2007, when filings grew by 40.3 percent and foreclosure sales grew by 45 percent from the previous year.

But don't go breaking out the bubbly just yet.

"I can't say the worst is over," said Kathi Williams, director of the housing division. "But we can be thankful for every little bit of relief we can get."

A change in the state law governing the foreclosure process and temporary moratoriums on foreclosures by lenders helped curb the 2008 numbers, according to Williams and other experts.

Also, many more homes that would have ended up as foreclosure sales, are being sold before the foreclosure process is over.

So-called "short sales" occur when the lender agrees to sell the house for less than the mortgage amount. Homeowners still lose the home, but a short sale is less damaging to their credit and is less costly for a lender.

For instance, one bank is about ready to accept an $89,000 short sale for an Aurora home that two years ago sold for $144,000, said Ron Woodcock of RE/MAX Southeast. An investor is buying that house.

And Jeri Groves, a broker with Realty Professionals of America, is working on a short sale to an owner-occupant who would pay $116,000 for a home that sold for $225,000 in Aurora. She expects the bank to approve it Thursday.

There were 39,307 foreclosure filings last year, compared with 39,915 in 2007. And there were 21,301 completed foreclosure sales in 2008, compared with 25,320 in 2007.

"Two things really have me concerned - the number of resets (in adjustable rate mortgages) that will start to take place this spring and the impact that we are going to see if unemployment continues to increase," Williams said.

Moratoriums on foreclosure by private lenders such as Citigroup and JP Morgan Chase, as well as Fannie Mae and Freddie Mac, helped hold the line on foreclosures last year. Also, the Colorado Foreclosure Hotline, 1-877-601-HOPE, kept 4,200 homes out of foreclosure, Williams said. If those homes had ended up as completed foreclosures, it would have erased the decrease in foreclosure sales.

Worried homeowners are calling the hotline, to the tune of 300 to 400 a day, a 28 percent increase in 2008 from 2007, said Sarah Noel, spokeswoman for the Colorado Foreclosure Hotline.

"The buzz I'm hearing from counselors is that more people are calling who are worried about losing their jobs," Noel said.

El Paso County is the one part of the state that's continuing to see huge increases in foreclosure filings and sales. Williams cited major employers there laying people off and the impact of the military as likely reasons. It also appears that El Paso County may have had a disproportionate amount of mortgage scams, she said.

Colorado and the Denver area had some of the highest foreclosure rates in the nation starting in the late 1990s. Colorado was ranked No. 1 for many years, though that began to change in 2007 as the housing bubble in other states began to burst.

The foreclosure crisis is now worse in other areas, such as Las Vegas, San Diego, Phoenix and Florida, all of which had a huge run-up in home prices that Denver and Colorado did not experience, said Jeff Thredgold, Vectra Bank economist.

"While Colorado and the Front Range had some excess home building and modest speculation, we didn't go through the process of these other areas, where homes essentially doubled in a few years, and then essentially fell off the cliff," he said.

"There is still some additional pain to come and some additional forces that are going to add to the market anxiety as Colorado moves into a recession. But the issue just pales in Colorado compared to California, Nevada, Arizona and Florida."

Economist Leo Chavez said there will be a lull in foreclosure activity in the Denver area through April, but after that "the second wave of foreclosures are going to explode. . . . The lull period is going to be the 'golden fleece.'

"Prices of homes might temporarily stabilize during this lull.

"Real estate agents will convince people now would be a good time to sell. So the people that need to sell but have been waiting for the market to stabilize will start to unload their property around April or May, and the market will be flooded with homes for sale by late summer or the early fall."

The temporary moratoriums on foreclosed homes will only postpone the inevitable, he said. "They will be about as effective as delaying the sun from setting."

Colorado home prices decline far less than national average

Colorado and Denver-area home values held up better last year than the nation's as a whole, according to a national report released Monday.

Overall, home prices in 2008 in Colorado fell only 0.71 percent from 2007, compared with an overall national decline of 11.4 percent, according to the Housing Mortgage Market Review by PMI Mortgage Insurance Co.

However, in the fourth quarter, home prices in the Denver-Aurora metropolitan statistical area fell by 9.3 percent from the fourth quarter of 2007, compared with a 16.7 percent overall decline for the U.S.

The state showing the biggest annual decline was California, where home values lost an overall 26.9 percent. The best-performing state was West Virginia, where home prices appreciated by 5.7 percent.

PMI reported that housing starts in Colorado came almost to a standstill last year, dropping by 69.4 percent in 2007. Nationally, starts fell off by 45 percent.

Only three other areas - the District of Columbia, West Virginia and Kansas - showed bigger declines than Colorado in housing construction.

But Mike Rinner of the Genesis Group, which tracks housing along the Front Range, questioned the numbers.

"We've had a big drop in housing construction, but I just can't believe that places like Nevada didn't show much bigger declines," Rinner said.

Back to Top