Wednesday, October 25, 2006

News from a Foreclosure Attorney

I spoke with an attorney in town today whose firm does a lot of foreclosures in the Oklahoma City area. I asked him if he was seeing an uptick in foreclosures recently. He said there was a small increase in foreclosures, but he expects things to really pick up next year. It is not due as much to the California and Florida bubbles -- although that will contribute some due to the reduction in opportunities for *1031 investments -- but rather due to local market and employment conditions. Both General Motors and the Dayton tire plant (as well as a couple other major employers in the Oklahoma City area) have closed or are closing their doors. As a result, some 5000+ high-wage workers have been or will be laid off and their severance pay is expected to start running out some time next spring.

He told me that he is already also seeing a noticeable increase in the availability of HUD homes that have already been through foreclosure.

He seems to think that I would be wise to wait another year before buying a house in the Oklahoma City area as he expects house prices to drop between 10-20% in the next year.

What that means is that my previous post indicating that OKC home prices seem pretty stable was based on incomplete information.


*Internal Revenue Code Section 1031 is a tool for deferring capital gains tax on commercial/investment transactions. This Section allows taxpayers to exchange real or personal property for new "like-kind" property, while deferring recognition of any capital gains. Section 1031 creates the ability for sellers to defer capital gains on investment property by placing the sale proceeds with a "Qualified Intermediary" for up to 180 days until the closing of the purchase of the replacement property.

You learn something new every day.


Teri said...

You might get a better deal in two years. The problem, from what I've read, is that developers are still trying to finish houses already started. Those houses will be added to the pool of unsold houses available today. If there's been any new construction in OKC (and I'm guessing that there has been), there will be a large pool of homes to choose from and desperate sellers.

Erudite Redneck said...

Um, if home prices in OKC dropped 10 to 20 percent next year, that would be the worst crash here since the oil bust. I don't see it happening, myself. I see'em stayin' flattish until next summer, then I see it straightening out. Those industrial jobs being lost are important, of course, and they won't be replaced. But there are even higher-paying jobs bring created in tech sectors and education, still, and I don't mean the faux tech stuff of the late 1990s. Plus, the oil-and-gas business is booming and an incredible number of jobs are still tied that here.

Now, that and $3 will get ya a cup at Starbucks. :)

OkieLawyer said...


Thanks for dropping by. Part of me hopes you are right, but, on the other hand, the conventional wisdom is that Oklahoma follows the coasts by about 2-3 years.

And, for that matter, even with the record profits the local oil companies are making, I am not seeing the hiring of higher wage workers that we would expect from the financial windfall they have received in the last year.

Erudite Redneck said...

The difference is that there has been very little, if any, bubble here in the first place. The markets that have crashed were out of control. This one got hot, and maybe even a wee bit overheated, but lack of hoardes of outside investors kept things from going loony. There were some speculators that came in, but not enough, I don't think, to cause severe ptoblems. Also, home prices here are so relatively low, there was little need for exotic mortgages. On another hand, all the youngsters who bought houses five years ago, and refi'd two or three times, are gonna be surprised when they decide to move up. And, anyone with an adjustable-rate mortgage might holler a little, but so far, rates, for all the talk about them going up, really haven't that much. Mortgage momney is still cheaper now than at almost any time in history -- another time to buy a house sooner rather than later. Cheer for the stock market. That'll keep bond yields relatively low, and mortgages rates follow the bond market. We'll see. :-)

Oh, and call me ER. :-)