Foreclosures in Chatham: Fact and Fiction

The prospect of foreclosure brings with it a lot of emotion.

Homeowners who go through the process are stressed, and neighbors get anxious that the value of the homes in the neighborhood will take a downward turn.

Buyers can get nervous, too: They hope for a great deal but have trepidation about the process.

Let’s take a step away from the emotion and take a look at what is happening in New Jersey and in Chatham on the foreclosure front.

Jeffrey G. Otteau, of the Otteau Valuation Group, which provides real estate analysis and information to realtors and others, offers some valuable insights into foreclosures. In New Jersey, 2.61 percent of homeowners, or 1 in 38, received a foreclosure notice in 2010.

However, the foreclosures are not evenly distributed. There are far more foreclosures in low income areas, where subprime mortgages were more common. Cities like Elizabeth or Newark and some of the rural areas in Sussex and Warren counties experienced a higher incidence of foreclosures than towns like Chatham.

Toward the end of 2010, the delinquency rate did slow down in New Jersey. Is this good news for the future? Not so. The slowdown was caused by the banks putting in place a moratorium on foreclosures after criticisms about their handling of the process.

Going forward, New Jerseyans can expect more foreclosures as the banks put in place new processes. Further trouble could be ahead since, according to Otteau, 15.2 percent of homes in New Jersey have an outstanding mortgage greater than the market value of the house. Another 4.2 percent of homes are close to negative equity.

Could the increased delinquency rate impact on home prices? Otteau said the average discount on a New Jersey home in foreclosure is 37.87 percent, and 25.27 percent for a home in pre-foreclosure. He said that when the housing market begins to recover, the rate of home prices rising in New Jersey will be slower because we will be dealing with a backlog of foreclosures and delinquencies.

According to Realty Trac, 45 Chatham homes are currently in pre-foreclosure. The Morris County Sheriff sale website shows another 22 homes in some stage of forelosure.

This is not good news, especially for those going through the process. But consider that in the last quarter of 2010, house prices in Morris County rose by 5 percent. Chatham Borough has the lowest inventory of homes at three months' supply across 400 towns in New Jersey, and Chatham Township is not far behind with a 4.5 months' supply.

A low inventory of homes generally drives prices up, as demand exceeds supply and we see multiple bids starting to occur. So while Chathamites are within reason to have concerns about foreclosures, this has to be balanced with consideration of the larger housing market, and so far the Chathams seem off to a positive start to the spring market.