Vampires and Monsters and Zombies, Oh My

Vampire REOs and Zombie Foreclosures star in a brief report issues by RealtyTrac this morning.  These "Monsters of the Housing Market," the company says, at least partially explains why so many bank-owned homes are not available for sale and why so many other properties are standing vacant.

Vampire REO is the company's term for homes that, while foreclosed and technically owned by the bank, are still occupied by their former owners.  RealtyTrac said it found that 47 percent of bank-owned homes nationwide are still occupied by the former owner.  

"On the surface," it says, "these properties will often look like normal, non-distressed homes, but beneath the surface they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these homes to try to recoup their losses on soured loans."

 The data makes no assumption about the reason for this.  Are the banks so overloaded they have been unable to process evictions?  Are there legal issues delaying or preventing evictions?  Is it possible that the banks and the previous owners have reached formal temporary or permanent lease agreements?  If the latter is widespread, might it indicate quite the opposite of a shadow inventory and a mutually beneficial accommodation for the bank and the displaced homeowner?

Vampire REOs are more prevalent in some states and metros than other.  The graphic below indicates vampire rates in some areas that are higher than the national average of 27 percent.  For example, in Miami 64 percent of REOs are classified as "Vampire"; in Phoenix it is 46 percent and in Las Vegas 40 percent.  Though many of these metros were especially hammered by foreclosures, some did not suffer disproportionately so the uneven distribution might also indicate some prevailing local factors.

A Zombie Foreclosure, on the other hand, is a home that has been vacated by the owner before a foreclosure has been completed.   A recent update by RealtyTrac shows that about 20 percent of homes in the process of foreclosure are vacant.  

Of the 20 metropolitan areas in the graph below, eight are in Florida, a state with notoriously long foreclosure timelines and large foreclosure backlogs.  New York is generally noted as the state where it takes the longest time to foreclose.  These Zombie Foreclosures might indicate that many homeowners expected their situations to be resolved long ago and have moved on with their lives.