In Shelby County, there were 1,030 total foreclosures in the first quarter this year, according to real estate information company Chandler Reports. That’s down from 1,252 foreclosures during the same period in 2012 – a drop of 17%. Pull back one year before that, though, and the number of foreclosures had spiked to 1,235 in the first quarter of 2012 compared to 964 in the first quarter of 2011. At this time last year, in other words, the area was in the midst of a 30% gain in foreclosures. Pointing to the recent drop, some local brokers and Realtors say a combination of forces is at work. There’s been a small improvement in the economy, which helps. Banks also are increasingly pursuing workouts, loan modifications and short sales.
Exactly in tandem with the 17% drop in total foreclosures, the number of foreclosure notices also fell by the same percentage. Foreclosure notices sunk from 2,186 in the first quarter of 2012 to 1,801 in the first quarter of 2013 – a 17.6% drop.
Studying the number of foreclosures themselves offers a look backwards at the activity. Looking at the notices – which lenders are required to publish in Tennessee in a newspaper of general circulation – offers a forward perspective on what’s to come. That’s because publishing the notices is an early step in the process. It’s not a perfect indicator, though, because the homeowner has time to work out an arrangement with their lender to save their home before a foreclosure auction occurs.
Raleigh and Frayser are two of the inner-city neighborhoods in Memphis that tend to see the largest cluster of foreclosure activity from one quarter to the next. But they both saw drops over the two first quarter periods. Raleigh’s 38128 ZIP saw 80 residential foreclosures in the first quarter, down from 84 in the first quarter of 2012.
Likewise, Frayser’s 38127 ZIP saw 77 foreclosures in the first quarter, down from 84 in the first quarter of 2012. Commercial foreclosures also dropped between the two first quarter periods – from 27 down to 23.
A drop in foreclosures ultimately leads to a drop in inventory as fewer properties are acquired and rehabbed by investors who fix-and-flip. That will lead to an increase in prices as supply drops in relation to demand by home buyers and real estate investors. The cash-flow and cap rates from investment properties in Tennessee are very attractive today and worth serious consideration.
