Zombie Foreclosures Down Sharply, Overall Vacancies Rise

Zombie foreclosures, those in which the properties become vacant before the legal process is complete, are down 36 percent in the current quarter compared to the same period in 2015.  RealtyTrac's Q2 2016 U.S. Residential Property Vacancy and Zombie Foreclosure Report says there were 19,187 properties in the process of foreclosure that had been vacated by owners or tenants.  This is 4.7 percent of the foreclosure inventory, down from a rate of 30.1 percent in the second quarter of 2015.

The so-called zombies have presented a problem throughout the housing crisis.  The condition of these vacant properties tend to deteriorate quickly from lack of maintenance, bringing down property values of entire neighborhoods.  They are also targets for vandalism and can increase the incidence of other illegal activities.

 "Lenders have been taking advantage of the strong seller's market to dispose of lingering foreclosure inventory over the past year, evidenced by 12 consecutive months of increasing bank repossessions ending in February and now evidenced by these numbers showing a sharp drop in vacant zombie foreclosures compared to a year ago," said Daren Blomquist, senior vice president at RealtyTrac. "As these zombie foreclosures hit the market for sale they are providing a modicum of relief for the pressure cooker of escalating prices and deteriorating affordability that have defined the U.S. housing market in recent years."

The largest numbers of zombie foreclosures were New Jersey (4,003), New York (3,352), Florida (2,467), Illinois (1,074), and Ohio (1,064).  Those states with the highest percentage of vacant homes in foreclosure were Oregon (11.8 percent); Indiana (9.5 percent); Kentucky (8.0 percent); Maryland (7.2 percent); and Washington (6.6 percent).

Among the largest metropolitan statistical areas (MSAs) those with the most zombie foreclosures were New York (3,526); Philadelphia (1,744); Chicago (857); Miami (651); and Tampa (627) while the highest percentage of such properties were in St. Louis (10.6 percent), Indianapolis (10.2 percent), Albany (9.8 percent), Baltimore (9.7 percent), and Portland, Oregon (9.7 percent).

Foreclosed properties (REO) have a vacancy rate of 15.9 percent, down 5.0 percent from the first quarter.  There are currently 43,602 unoccupied REO properties nationwide.

There were a total of 1.398 million vacant one-to-four family residential properties nationwide, regardless of foreclosure status, in the second quarter.  This is 1.6 percent of all residential properties and an increase of 2.7 percent from the 1.362 million vacant properties in the first quarter of the year.   

The highest percentage of vacant properties is in Michigan at 3.4 percent followed by Indiana (3.1 percent), Mississippi (2.8 percent), Alabama (2.6 percent), and Oklahoma (2.6 percent).  Among large MSAs the highest rate by far is in Flint, Michigan at 7.2 percent.  Youngstown (4.7 percent), Detroit (4.4 percent), Beaumont-Port Arthur (3.9 percent), and Mobile (3.7 percent) round out the top five.

RealtyTrac says that 1.1 million or 4.4 percent of residential properties owned by investors were vacant in the second quarter and those vacancies account for 75 percent of the total.