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As home sales rise, foreclosure filings keep recovery elusive

Overall, experts say, home sales across the Island

Overall, experts say, home sales across the Island are increasing and the steep price declines of the last year are slowing. (April 29, 2008) Photo Credit: Getty Images

For the first nine months of last year, the residential market on Long Island looked like this: For every 10 homeowners who were able to sell their houses, another eight slid into default at the beginning of the foreclosure process.

>>CLICK HERE: View information on foreclosures in your community

An example of the region's deeply troubled housing market is Windsor Parkway in Hempstead, which is like so many dozens of streets and neighborhoods across Long Island, where residential sales appear to be making a modest comeback - but that positive news isn't really the full story.

On this street, eight homes were sold in the first nine months of 2009. A closer look at these eight sales shows that four were foreclosures - properties sold at auction, where, records show, the banks themselves bought the homes back. That meant a new owner was not moving into an empty house on Windsor Parkway and perhaps spending money to improve the property with repairs and landscaping. And, in addition, there were 10 lis pendens filings - the first step in the foreclosure process - on this street during the same period.

Many communities on Long Island have fared far worse, where the ratio between homeowners heading into foreclosure and those able to sell during the first nine months of 2009 was more than 3 to 1, according to a Newsday analysis of data on home sales and lis pendens filings. Across the Island, the average during the same period was nearly 1 to 1.

"Certain places have just been so hard-hit, that they'll take much longer to come back," said Beth Marten, a buyers' agent and real estate investor in Baldwin.

The data Newsday examined were provided by the Long Island Real Estate Report in West Islip.

No recovery - yet

Overall, experts say, home sales across the Island are increasing and the steep price declines of the last year are slowing. While real estate sources say one of the reasons home sales increased last year was because falling prices made more houses affordable, the numbers of foreclosures in many communities are also a significant factor.

Newsday reported last week that home sales on Long Island fell in 2009 by more than $1 billion, a 9.3 percent drop from 2008, but the number of homes sold from the previous year went up 2.8 percent.

"We're seeing improvement but let's not mistake it for a recovery," said Jonathan Miller, who heads the appraisal firm Miller Samuel in Manhattan. "There's some good news and we'll take it, but very little has been resolved."

Foreclosure sales rise

Even as home sales rose last year, an increasing number of them were foreclosure sales, which take place at auction and, in many cases, simply send the property back to the bank, with virtually no positive economic impact on the street on which the house sits. Across Long Island for the first nine months of last year, 9 percent of all home sales were foreclosure sales. In some communities, that number was 33 percent.

>>CLICK HERE: View information on foreclosures in your community

Newsday's analysis showed that the trends worsened in many of the Island's low-income and minority communities, making a real estate comeback there - and the dream of home ownership - even more elusive.

"The higher the [lis pendens- to-sales] ratio, the higher probability that housing prices will fall," Miller said.

While many of those communities always had some foreclosures, home sales used to far outpace them, according to Long Island Real Estate Report president Pat Ammirati.

The number of foreclosures in a community affects far more than just the homeowners in trouble. As foreclosures rise and prices fall, it's particularly tough for homeowners who are not in default to sell - especially if they bought at high prices.

"There's someone who has paid for a house and is sitting in that house and has watched it go down in value," said John Fitzgerald, a foreclosure and bank-owned property specialist with RealtyConnect USA, a new real estate agency in Hauppauge. "Now, they can't refinance, they can't sell and they can't get out."

And in communities with fast-rising lis pendens notices, the number of eventual foreclosures could rise even more, imperiling more homeowners who are keeping up with their mortgages. For the first nine months of last year, for example, just to name two communities, Brentwood had more than three lis pendens filings for every house sale; East Moriches had nearly two.

Blame it on the recession

To experts, the reasons for the rise sit squarely on the recession.

"The majority of people we're counseling now have prime mortgages and their primary reason for default was a loss of job or loss of income," said Eileen Anderson, a senior vice president at the Community Development Corp. of Long Island.

There's little sign of a letup to come, especially if the two keys to the region's economic growth - jobs and credit - remain unstable.

"It's unlikely that we are going to see a significant improvement in unemployment and an easing of credit in 2010," Miller said.

Indeed, it could take three to five years before foreclosures abate and the market makes a real recovery, said Island Advantage Realty broker Todd Yovino, whose Huntington firm specializes in bank-owned foreclosed properties.

Nonetheless, there are some bright spots. Kisha Wright, an assistant vice president with the Long Island Housing Partnership, said she has had more success in modifying the terms of mortgage loans recently.

"I think the government and the lenders and the banks and the investors are making strides in the hopes of a recovery," Wright said. "I don't think we're quite there yet."

>>CLICK HERE: View information on foreclosures in your community

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