By Cameron Moix - Colorado Springs Business Journal

Feb 3, 2017 

El Paso County saw fewer foreclosures last year than it has in recent history — a statistic that bodes well for the health of the local economy, but makes the Colorado Springs real estate market a more challenging one for investors.

There were 1,287 foreclosure filings in El Paso County in 2016, according to records from the office of Public Trustee Tom Mowle. That number is a 12.4 percent drop from 2015 and is the smallest total number of annual foreclosures seen in El Paso County since 1,165 were filed in 2001.

Another positive sign for the local housing market came by way of deed releases, which totaled 39,478 in 2016 — an 8.3 percent increase from 2015 and the highest number seen since 44,038 in 2013 — indicating that more homeowners are selling, refinancing or paying off their mortgages.

“That shows you how healthy the market is,” said Colorado Springs-based Realtor and former CSBJ real estate reporter Amanda Luciano.

Not all those foreclosed-upon properties end up on the auction block — due to bankruptcy filings and last-minute deals with lenders — but those that do meet stiff competition each Wednesday morning at Mowle’s office (105 E. Vermijo Ave., Ste. 101) during the weekly El Paso County foreclosure auction.

As home prices increase and short sales become less common, the auctions remain a last resort for investors looking to pay cash for affordable homes to lease or “flip” (when a home is sold twice in 12 months, usually involving renovations).

“A greater proportion of the properties up for auction are being purchased by investors,” said Mowle, who has served as public trustee since 2008. “It’s been more steady and gradual than any particular big shift.”

He said local foreclosures are still higher than the Denver metro area, driving some investors down to Colorado Springs in search of better deals and wider profit margins.

“In 2016 there were fewer sales and more being bought by investors,” Mowle said. “Sometimes they’re bid up a bunch and sometimes they’re not.”

As more and more investors have become attracted to the growing shortage of properties at auction, the percentage of homes selling each Wednesday has gradually increased each year since the market began to stabilize following the 2007-08 crash of the U.S. housing market — from 10 percent in 2010 and 2011 to a whopping 61 percent last year.

“I suppose the percent is both a combination of fewer properties being available and more properties being purchased,” Mowle said.

The phenomenon of “flips” became famous in the years leading up to the recession and are once again beginning to flood mid-sized markets like Colorado Springs with competitive buyers and bidders.

One such bidder is Brian Sleeth, a Colorado Springs-based property manager for the California real estate investment firm Wedgewood Inc.

“The Colorado Springs market is one of the best in the country,” Sleeth said. “There is a lot of job growth and there is a lot of population growth.”

El Paso County saw fewer foreclosures last year than it has in recent history — a statistic that bodes well for the health of the local economy, but makes the Colorado Springs real estate market a more challenging one for investors.

There were 1,287 foreclosure filings in El Paso County in 2016, according to records from the office of Public Trustee Tom Mowle. That number is a 12.4 percent drop from 2015 and is the smallest total number of annual foreclosures seen in El Paso County since 1,165 were filed in 2001.

Another positive sign for the local housing market came by way of deed releases, which totaled 39,478 in 2016 — an 8.3 percent increase from 2015 and the highest number seen since 44,038 in 2013 — indicating that more homeowners are selling, refinancing or paying off their mortgages.

“That shows you how healthy the market is,” said Colorado Springs-based Realtor and former CSBJ real estate reporter Amanda Luciano.

Not all those foreclosed-upon properties end up on the auction block — due to bankruptcy filings and last-minute deals with lenders — but those that do meet stiff competition each Wednesday morning at Mowle’s office (105 E. Vermijo Ave., Ste. 101) during the weekly El Paso County foreclosure auction.

As home prices increase and short sales become less common, the auctions remain a last resort for investors looking to pay cash for affordable homes to lease or “flip” (when a home is sold twice in 12 months, usually involving renovations).

“A greater proportion of the properties up for auction are being purchased by investors,” said Mowle, who has served as public trustee since 2008. “It’s been more steady and gradual than any particular big shift.”

He said local foreclosures are still higher than the Denver metro area, driving some investors down to Colorado Springs in search of better deals and wider profit margins.

“In 2016 there were fewer sales and more being bought by investors,” Mowle said. “Sometimes they’re bid up a bunch and sometimes they’re not.”

As more and more investors have become attracted to the growing shortage of properties at auction, the percentage of homes selling each Wednesday has gradually increased each year since the market began to stabilize following the 2007-08 crash of the U.S. housing market — from 10 percent in 2010 and 2011 to a whopping 61 percent last year.

“I suppose the percent is both a combination of fewer properties being available and more properties being purchased,” Mowle said.

The phenomenon of “flips” became famous in the years leading up to the recession and are once again beginning to flood mid-sized markets like Colorado Springs with competitive buyers and bidders.

One such bidder is Brian Sleeth, a Colorado Springs-based property manager for the California real estate investment firm Wedgewood Inc.

“The Colorado Springs market is one of the best in the country,” Sleeth said. “There is a lot of job growth and there is a lot of population growth.”

Before becoming a regular at the El Paso County auctions last year, Sleeth said he was doing investing in the Denver market until the market became volatile and less conducive to maintaining good profit margins.

“Rates started dropping and prices just skyrocketed,” he said. “That’s pretty much what brought us to Colorado Springs. The prices down here were much lower and the population growth hasn’t jumped yet like it has in Denver over the past five years.”

Sleeth strictly buys Colorado Springs-area foreclosures to rehab them and put them back on the market within 200 days, which he said has become more challenging lately due to a tightening real estate market and a year in which Colorado Springs experienced its fewest foreclosures in recent history.

“Over the last six months it has gotten pretty tight,” he said. “We haven’t gotten anything for the past three weeks — that has been pretty common — because we’re true to our budget and we’re not going to go too far over our set price.”

Sleeth and his company are buying for resale, not to create investment properties. While those buying houses to flip have relatively low tolerance for risk, it isn’t uncommon for those who plan to convert the homes into rentals to reach bids around $30,000 higher than the lender’s opening bid.

“You have to have a pretty high tolerance for risk, because you don’t know what’s wrong with the place until you own it,” Luciano said. “And then you also own all the debts and structural issues that come with it.”

Sleeth said that he is currently observing where the market is heading.

“We’ll make adjustments to the budget if it gets to that point, but it’s too early right now to tell,” he said. “It has only been the past five or six months that bidders have been so aggressive. We’ll keep an eye on it, but the thought is that they will keep going high, and we’ll stay true to our budgets … and then eventually they’ll have too much on the market with too little profit and they’ll have to back out. But it hasn’t gotten there yet.”

But despite the challenges current trends pose to local investors, Luciano said news of fewer foreclosures is positive for residents and the local economy.

“Now, people can just sell their houses before having to go into foreclosure,” Luciano said. “Now, since the market has gone up so much, it’s just hard to justify a short sale because banks know they can get more at auction.”

The first big wave of foreclosures came in 2006 and 2007, as the U.S. housing market began to collapse thanks to bad mortgages and junk bonds. Back then, it wasn’t uncommon to see nearly 100 properties at auction with only a dozen potential bidders. In 2012, Luciano reported seeing 50 or so people bidding for between 30 and 40 foreclosures.

Even then, the margins for investors were beginning to tighten as the local and national housing market was beginning to see the first waves of recovery.

In recent months, there have typically been dozens of bidders competing for fewer than 20 properties at each auction.

COLORADO CONTEXT

For context, there were a total of 720 new foreclosure starts (up from 690 in 2015) and 41,882 releases of deeds (up from 39,810 in 2015) in Denver last year.

The housing market affected El Paso County roughly 18 months later, and 2009 saw a record-breaking 5,288 foreclosure filings.

There were 501 foreclosures filed in Pueblo County last year, the lowest number seen since 433 in 2000, according to records from the Pueblo County Public Trustee’s office. The peak of foreclosure filings in Pueblo County was 1,569 in 2009.

There were 9,158 foreclosures in Colorado last year (down 18.4 percent from 2015) and 933,045 filings nationally (down 14 percent from 2015).

Original Link:http://www.csbj.com/2017/02/03/foreclosures-hit-15-year-low/