Foreclosure filings hit record numbers this fall in York, Chester and Lancaster counties, and real estate agents and others expect the trend to continue in 2012.
In October, 299 foreclosures were filed in the three counties and 266 were filed in November, according to RealtyTrak, which tracks foreclosures nationally. The figures are the highest monthly filings since foreclosures started rising in 2008 because of bad loans and a failing economy.
The rise in foreclosures is likely to affect housing prices. Market value is based on the last three sales in a neighborhood. In some places, the last three sales were all foreclosed properties. Typically, lenders - primarily banks - price foreclosures under current market values.
The numbers don't mean more people are losing their homes, however. Some of the increase is caused by lenders being more cautious after the "robo-signing" scandal where some lenders admitted processing foreclosure papers without reading them or making sure they were complete. Also, lenders are working with homeowners to modify loans or develop new payment schedules.
"Lenders have been postponing cases," said Jack Kimball, York County's master-in-equity, the judge who hears all foreclosure cases.
"There has been an abundance of caution," he said.
Many of the foreclosures pending in the region have been in process for some time and are now being released for sale by the banks. There is also a large number of "shadow" homes, homes were borrowers are extremely delinquent or have been foreclosed on, but no put up for sale.
With local unemployment still in double digits, Kimball is seeing more and more people who can't pay their mortgage.
"The problem has not turned around," he said.
Change in attitude
Kimball has seen a change in the people who come to his court in the last three years. When the first foreclosures hit, people showed up fighting to keep their homes, he said.
Now about one out of every five people hit with a foreclosure notice come to court proceedings, he said. They come not to fight, but to give up, he said.
"People don't have jobs. They can't pay anyone; that's the problem," Kimball said.
An order by Jean Toal, chief justice of the state Supreme Court, has had a positive effect, Kimball said. In May, she ordered that lawyers for lenders must certify homeowners were given a chance to modify their loans. She took the step because trial courts reported a breakdown between lenders and the people owing them money.
The result was a backlog of foreclosure proceedings. In June, there were just eight sales in York County, Kimball said.
The number slowly increased in July and August, before hitting 60 sales in October and 64 in November, according to Kimball. (Kimball's statistics represent foreclosure sales. RealtyTrak numbers are foreclosure filings.)
He expects to put between 50 and 55 homes for sale on Tuesday at the York County court house. So far, 70 sales have been scheduled for February. More are likely, he said.
The actual number of sales, however, won't be known until the day of sale. Lenders typically file the sale notice and then pull it at the last moment as they continue to work with homeowners, Kimball said. Banks are just as likely, however, to return after the foreclosure sale at the courthouse and start the process all over again for the next month's sale.
Some of the affected properties have already gone through a loan modification, he said. Their owners can't even make the payments with a 4 percent loan, Kimball said.
"The problem is going to continue until the economy picks up," he said.
For homeowners wishing to sell, foreclosures can have a big impact.
Realtor Stephen Cooley of Rock Hill said foreclosures result in three significant negatives:
Because the foreclosure process takes time, foreclosed properties deteriorate "and they are in bad condition when they enter the market." A property's condition "hurts a neighborhood."
Lenders typically sell for 10 percent less than the current market value, hoping the reduced price attracts buyers. "Banks are the most motivated sellers," Cooley said.
Banks usually will not make foreclosure sales with buyer contingencies attached.
The effect is real estate agents and home sellers make sure they are pricing "ahead of the market" and not responding after a neighboring home is placed in foreclosure, Cooley said.
It also means real estate agents need to have back-up options, said Nick Kremydas, chief executive officer of the S.C. Association of Realtors.
Buying a home on a short-sale - where sales proceeds fall short of the balance of debts secured by liens against the property - is often a lengthy process, Kremydas said.
"There are great deals out there," Kremydas said. "People with patience have a lot of choices."
Even with a rise in foreclosures, Kremydas and Cooley see encouraging signs for 2012 and beyond.
"We are seeing housing inventory shrinking and finding more multiple offers," Cooley said. "I'm more optimistic today than I was 12 months ago; 2011 was the bottom of the roller coaster."
Kremydas said except for the beach condo market, South Carolina home values haven't taken the hits in values that other states have.
The U.S. Census predicts South Carolina's population will grow by a million people in the next few years with most of that growth along the coast, Kremydas said. "We don't have the housing inventory to support that. It means 250,000 new units. . .
"There is some optimism. We're not getting any worse," he said.
Nonetheless, they are concerned about foreclosures. They would rather see them all put on the market at once.