Foreclosure activity is picking up in much of southern New Jersey, as processors get to work on the backlog caused by judicial delays.
What will become of these homes?
Investors may seize the opportunity to buy at least some of the homes at distressed prices, turning them into single-family rentals and hoping their investments appreciate, housing experts and local real estate agents said.
“I’m going to guess more of them (investors) will turn them into rental properties for a couple years for more price appreciation, which isn’t a bad thing,” said Peter Reinhart, director of the Kislak Real Estate Institute at Monmouth University. “In the last year or so, there was a lot of buzz about more and more people renting, but supply and demand works.”
Sue Dunphey, broker and sales associate at Re/Max Atlantic Absecon, has seen interest in rentals increase in the past six months — from both renters and potential buyers.
“People that I’ve talked to lately are looking at foreclosures to buy and flip, and some are looking to hold onto them as rental properties to let the market come back a little more,” she said.
In New Jersey, where foreclosures are a judicial process, completed cases remained low as courts ordered a moratorium on foreclosures in response to improper procedures and robo-signings.
That has been changing in the state and through much of the region, and a second wave of foreclosures has begun, according to data from RealtyTrac, an Irving, Calif.-based foreclosure market information service.
In the second quarter of 2012, foreclosure activity — including defaults, auctions and bank-owned properties — increased 75 percent in Atlantic County compared with the second quarter of 2011, RealtyTrac data show. The increase was 36 percent in Cape May County; 93 percent in Cumberland County; and 52 percent in Ocean County.
Investors buying foreclosures “see this as an opportunity because the rental market is so strong, and the rental market is so strong because you have a lot of displaced homeowners over the years who lost their homes who still need a place to live but aren’t qualified to buy or don’t want to buy,” RealtyTrac spokesman Daren Blomquist said.
National foreclosure activity may return closer to normal by the end of 2013; New Jersey may take a year longer due to the state’s longer foreclosure process, he said.
Joe Fishman, of the South Jersey Real Estate Investors Association, said investors play an important role in rehabbing homes in disarray after being vacant or neglected.
“I’ve walked into properties vacant for two or three years and you have a family of possums living in there,” said Fishman, an investor who lives in Tuckerton and who also works as a mortgage loan originator at Infinity Home Mortgage in Northfield. “These properties have problems and they need to be fixed and the average home buyer simply cannot afford to buy a property even at reduced rates and fix it up.”
Anthony D’Alicandro, president of the Atlantic City and County Board of Realtors and owner of Coldwell Banker Casa Bella Realtors in Linwood, said vacant homes pose their own sets of challenges.
“A lot of these homes coming on the market are not finance-able because of their conditions. It will create opportunities for investors and will also satisfy a lack of rental homes,” D’Alicandro said.
A three-bedroom rancher on Country Club Drive in Northfield illustrates some of the troubles.
Grass is overgrown, and branches of a weeping willow tree stretch onto the roof of the home, which is in pre-foreclosure and has been abandoned for nearly two years, D’Alicandro said of the home, listed at $139,000.
Inside, there is a hole in the ceiling, floor and carpeting that needs replacing, a musky smell and a few mosquitoes.
Requiring thousands of dollars in repairs, homes like these are more likely to be bought by investors than a typical house hunter, D’Alicandro said.
Meanwhile, investors are not the only ones turning their attention to distressed properties.
Legislators have also proposed ways to turn foreclosed and abandoned homes into affordable housing.
On July 30, state Sen. Raymond Lesniak, D-Union introduced the New Jersey Residential Foreclosure Transformation Act. The bill would allow a New Jersey Housing and Mortgage Finance Agency board to enter public-private partnerships to take on foreclosed residential properties from institutional lenders. The properties would then be purchased by another public agency, a developer or a qualifying household with a 30-year deed restriction for affordable housing.
Lesniak said abandoned properties will continue to weigh down property values.
“The state wouldn’t buy any homes,” he said about his proposed legislation. “The state could hold title for 60 days, but that would be a conduit to either private investors or municipalities or nonprofits or individuals themselves. It would most likely be municipalities with affordable housing funds or nonprofits.”
After a previous version was vetoed by Gov. Chris Christie, Lesniak said, he changed his proposal to give the authority to the New Jersey Housing and Mortgage Finance Agency rather than set up a separate governmental corporation.
Lesniak said he expects the bill to go to a full Senate vote later this month.
Al Crossen, a North Wildwood resident and retired project manager who has followed the proposals and opposes them, said it would amount to a bailout of banks that made these loans.
“Our state’s hurting with dollars, why would the taxpayers say, ‘Let’s get into the mortgage business?’” he said. “We’re inheriting another housing project.”
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