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Zombie Foreclosures: The Financial Ghosts of the Housing Market

• David (Viacheslav) Davidenko

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The housing market is home to many unsettling realities, one of which is the phenomenon of zombie foreclosures—the haunting story of homes left vacant, abandoned by their owners, yet still bringing immense emotional and financial burdens. This episode uncovers the complex layers of this troubling issue, presenting not only the stark statistics but also the human stories behind them. We delve into the multifaceted causes of zombie foreclosures, exploring how misunderstandings about the foreclosure process contribute to this growing trend.

As we navigate the conversation, we address the emotional toll it takes on homeowners, illustrating the feelings of entrapment and despair that can accompany falling behind on mortgage payments. You’ll hear firsthand accounts of individuals feeling like they are sinking in quicksand, a powerful metaphor for the overwhelming plight many face when trying to escape their precarious situation. 

In addition to sharing these poignant stories, we offer practical advice on what individuals can do to protect themselves from the zombie foreclosure epidemic. Highlighting the importance of communication with lenders, and understanding one’s rights, we aim to arm listeners with the knowledge they need to navigate their financial struggles more effectively.

With a focus on systemic issues, the episode doesn’t just stop at personal responsibility. We emphasize the need for broader reforms in the housing market to prevent such situations from arising in the first place. By exploring potential solutions, we aim to inspire change—not just at the individual level but on a societal scale. Join us for a thought-provoking exploration of the realities of zombie foreclosures and discover how awareness and action can lead to meaningful change in your life and community.

📰 Read more about this topic in our latest article: https://sunrisecapitalgroup.com/the-rise-of-zombie-foreclosures-what-it-means-for-homeowners-and-the-housing-market/

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Speaker 1:

Welcome to the Deep Dive. Today we're diving into something a little spooky, a little unexpected in the housing market Zombie foreclosures.

Speaker 2:

Zombies Like the walking dead in real estate.

Speaker 1:

Not quite, but it can feel pretty apocalyptic for the homeowners involved. We're talking about houses that are stuck in this weird foreclosure limbo, often sitting vacant and decaying like something out of a horror movie.

Speaker 2:

Okay, I'm intrigued, but how does a house actually become a zombie?

Speaker 1:

Well, we've been digging through a ton of research on this and it seems like it often starts with a misunderstanding. You know, a homeowner falls behind on their mortgage payments, facing foreclosure, and they decide to just walk away from the property, thinking that ends their responsibility.

Speaker 2:

So they just pack up and leave, assuming it's the bank's problem now.

Speaker 1:

Right, but here's the thing the foreclosure process can take a long time months, even years in some cases and during that time the homeowner is still legally responsible for the property.

Speaker 2:

Wait. So, even though they've moved out, they're still on the hook for property taxes, insurance, maintenance, all of it.

Speaker 1:

Exactly, and that's where things can get really scary. You're talking about people who are already struggling financially now, facing this mountain of debt for a house they don't even live in anymore.

Speaker 2:

It's like a financial ghost haunting them. I imagine this can have a devastating impact on their credit, their ability to secure future loans, even rent an apartment.

Speaker 1:

Absolutely. And it's not just the financial strain, it's the emotional toll as well, the feeling of being trapped, like you can't move forward with your life because this abandoned property is holding you back.

Speaker 2:

It's a really tough situation to be in, and what's even more concerning is that this isn't just happening in a few isolated cases. We're seeing a significant rise in these zombie foreclosures across the country.

Speaker 1:

That's right. Early this year, over 212,000 homes were in some stage of foreclosure, and out of those, at least 7,094 were sitting vacant, potentially becoming zombies. That's a lot of people facing this nightmare.

Speaker 2:

Yeah, and what's really fascinating is that this isn't just happening in economically depressed areas or places with super high housing costs. It's popping up all over, even in cities with seemingly booming housing markets.

Speaker 1:

That's what I find so interesting too, Like you see headlines about these hot real estate markets, but then you dig a little deeper and you find these hidden vulnerabilities, these cracks in the foundation.

Speaker 2:

It makes you wonder about the stability of the system as a whole, right Like if this is happening even in the supposedly strong markets. What does that tell us about the bigger picture?

Speaker 1:

Exactly, and one thing that really jumped out at me in our research was the state-by-state variation in these zombie foreclosures. It's not uniform at all. Some states are seeing these cases skyrocket, while others are relatively stable.

Speaker 2:

Yeah, it's a real puzzle, isn't it? And it's not as simple as just looking at housing prices, like take Missouri, for example, they've seen an 85 percent increase in zombie foreclosures 85 percent.

Speaker 1:

That's huge. But Kansas City, their biggest city, has a relatively affordable median home price around $249,000. I wouldn't have expected to see that kind of jump there.

Speaker 2:

Right, it seems like something else is going on. And then you look at South Carolina. They had a 31% increase, which is still significant, but their housing market, especially in Charleston, is booming. I mean, the median price there is $645,000.

Speaker 1:

So you've got these seemingly conflicting trends affordable housing but lots of zombies. So you've got these seemingly conflicting trends affordable housing but lots of zombies. Booming market, but still a notable increase Makes you wonder what factors are really driving these differences.

Speaker 2:

It seems like we have to look beyond just the price of a house. You've got local economic conditions, how fast foreclosures are processed in each state. Even how easy it is for struggling homeowners to sell before things get really bad.

Speaker 1:

So it's a much more complex picture than just high prices equal more foreclosures. It's like this web of interconnected factors all influencing the outcome.

Speaker 2:

Yeah, and I bet a lot of people assume that if they live in a big city with a hot housing market they're immune to this problem. But guess what? Our research shows that even places like Miami, new York, even Chicago, are dealing with a rising tide of pre-foreclosure properties.

Speaker 1:

No one's immune. But why? What's making even these bustling markets vulnerable to this zombie foreclosure trend?

Speaker 2:

Well, I think it's a combination of factors. High property taxes can be a real burden, especially for people on fixed incomes. Then you've got the ever-increasing cost of living, making it hard to keep up with mortgage payments, even with a decent job. And let's not forget about the unpredictable nature of job markets these days. You could be doing great one minute, then bam, unexpected unemployment hits, throwing your whole financial stability out the window.

Speaker 1:

You know it's easy to get caught up in all these numbers and statistics, but we have to remember that behind each one of those foreclosures there's a human salary.

Speaker 2:

Absolutely.

Speaker 1:

Real people facing real hardships and it's important to understand that emotional toll because ultimately those human stories are going to help us find real solutions.

Speaker 2:

You're so right. You know, sometimes statistics can feel a little bit abstract, but when you hear the actual voices of people who have gone through this experience, it really hits home.

Speaker 1:

You came across a lot of those voices in your research. What were some of the things that really stood out to you?

Speaker 2:

Well, one story that I kept coming back to was about this woman who described feeling like she was trapped in quicksand. She had lost her job and she was falling behind on her mortgage payments. So she decided to move in with family to try to save money, but the foreclosure process just dragged on and on for years.

Speaker 1:

Wow.

Speaker 2:

And she just felt stuck, you know, like she couldn't move forward with her life, because this house, this empty house, was weighing her down.

Speaker 1:

That image of quicksand. It's powerful. It really captures that feeling of sinking. You know, no matter how hard you try to get out, you just keep getting pulled further down.

Speaker 2:

It's true, and it's not just the financial burden, it's the emotional and social impact as well. The financial burden, it's the emotional and social impact as well. A lot of people facing foreclosure they feel ashamed, they feel isolated. I can imagine they might withdraw from their communities or avoid social gatherings because they feel like a failure.

Speaker 1:

It's almost like a vicious cycle. You know the financial stress leads to emotional distress, which makes it even harder to cope with the practical challenges of foreclosure.

Speaker 2:

Exactly, and that's why it's so important for us to talk about this, to break the stigma surrounding foreclosure. People need to know that they're not alone. There are resources available to help them through this.

Speaker 1:

That's such an important message and it makes me think about, you know, the bigger picture here. As we've been discussing all of this, I can't help but wonder if there's a connection between the rise of zombie foreclosures and the overall health of our economy.

Speaker 2:

Hmm, that's a great question.

Speaker 1:

Are these just isolated incidents, or could they be a sign of something bigger? You know something lurking beneath the surface.

Speaker 2:

I think it's definitely a question worth exploring. You know, on the surface it might seem counterintuitive, right? We're seeing these zombie foreclosures popping up even in cities with strong housing markets.

Speaker 1:

Yeah, this doesn't seem to make sense.

Speaker 2:

But when you look a little closer you start to see the cracks in the foundation.

Speaker 1:

Okay, well listen. What kind of cracks are we talking about?

Speaker 2:

Well, even in a booming economy, there are always going to be pockets of vulnerability. You know, there are people who are living paycheck to paycheck, struggling to keep up with the rising cost of living.

Speaker 1:

Yeah, I mean not everyone's riding that wave.

Speaker 2:

Exactly, and there are communities that are being hit by job losses or stagnant wages, and for those folks even a small economic downturn could push them over the edge.

Speaker 1:

So it's like those seemingly strong markets they're actually built on a foundation of sand. They might look stable from a distance, but underneath there's a fragility that can be exposed when the tide turns.

Speaker 2:

That's a great way to put it, and I think we also have to remember that those big economic indicators, they don't always reflect the reality on the ground. You know, there are people living in those bustling cities who are barely scraping by.

Speaker 1:

One missed paycheck away from disaster.

Speaker 2:

Exactly, and for them the threat of foreclosure is very real, even if the overall market seems healthy.

Speaker 1:

So are you saying that these zombie foreclosures could be like canaries in the coal mine? You know an early warning sign that there might be trouble ahead.

Speaker 2:

It's certainly possible. If we see this trend continue to escalate, it could be a signal that a large segment of the population is very vulnerable, unable to withstand even minor financial shocks.

Speaker 1:

That makes me think about that whole too big to fail idea that we heard so much about during the last financial crisis. Are we setting ourselves up for something similar in the housing market? Could a wave of zombie foreclosures trigger a domino effect destabilizing the entire system?

Speaker 2:

Those are big questions and I don't think anyone has all the answers right now, but I do think it's crucial for us to be asking those questions, to be looking for those early warning signs and to be prepared to act if necessary.

Speaker 1:

Okay, so this is a lot to take in, and I know our listeners are probably feeling a little bit overwhelmed at this point, so let's shift gears for a moment and talk about what individuals can do to protect themselves. We've painted a pretty bleak picture here, but there are steps that people can take to avoid becoming a statistic in this zombie foreclosure apocalypse.

Speaker 2:

That's right. Awareness is key and there are definitely things you can do to reduce your risk and hopefully avoid this whole nightmare.

Speaker 1:

Okay, let's get practical here. What's the first line of defense? What should someone do if they start to struggle with their mortgage payments?

Speaker 2:

Early action is crucial. The sooner you reach out for help, the better. Don't wait until you're drowning in debt.

Speaker 1:

So talk to your lender, right.

Speaker 2:

Exactly. If you're starting to fall behind on your payments, contact your lender as soon as possible.

Speaker 1:

But I bet a lot of people are hesitant to do that. You know they might feel embarrassed or afraid of what will happen.

Speaker 2:

I get it, but honestly, lenders don't want to foreclose. It's a costly process for them too, so they're often willing to work with borrowers to find a solution.

Speaker 1:

So it's really about communication.

Speaker 2:

Exactly. Keep those lines of communication open. Be honest with your lender about your situation. They might be able to adjust your payment schedule or lower your interest rate, or even forgive a portion of your debt.

Speaker 1:

There are options out there.

Speaker 2:

There are, but what if those options don't work out? What if the lender isn't willing to cooperate or the homeowner simply can't afford to stay in the property? Well, in that case it might be time to consider selling the property before the foreclosure process begins.

Speaker 1:

OK, but selling a house can be complicated, stressful, especially if you're already under financial pressure.

Speaker 2:

It can be, but there are resources available to help. You know there are real estate agents who specialize in working with homeowners facing foreclosure. They can help you navigate the process, market your property effectively and, hopefully, find a buyer quickly.

Speaker 1:

And what about those who don't have enough equity to sell or those who are already in the midst of foreclosure? Are there any options for them?

Speaker 2:

Yes, Even in those situations there are steps you can take. There are government programs and nonprofit organizations that offer assistance to homeowners facing foreclosure. They can provide financial counseling, legal aid, even temporary housing assistance.

Speaker 1:

So, even when it feels like all hope is lost, there are still avenues to explore.

Speaker 2:

Absolutely. You're not alone in this and there are people who want to help.

Speaker 1:

You know, as we've been talking, I've been struck by the resilience of the human spirit. You know, even in the face of all this adversity, people find ways to cope, to adapt, to rebuild their lives.

Speaker 2:

You're so right. It's inspiring to see people taking those challenges and turning them into opportunities, using their setbacks as motivation to find creative solutions.

Speaker 1:

And I think that's a perfect note to end on for today. We're back and ready to wrap up our deep dive into this unsettling corner of the housing market. You know we've been talking a lot about individual stories and struggles, but it's clear that these zombie foreclosures are really a symptom of some much larger issues.

Speaker 2:

Absolutely. It's like we're looking at this microcosm of the economy as a whole, these individual hardships. They really reflect these broader trends, these systemic problems that we need to address as a society.

Speaker 1:

So we can give people advice all day long about reaching out to lenders and exploring different options, but wouldn't it be better to prevent these situations from happening in the first place, like what are some of the systemic solutions that could actually address the root causes of this zombie foreclosure problem?

Speaker 2:

You hit the nail on the head. It's not enough to just treat the symptoms. We have to go deeper right. We need a multi-pronged approach, with policymakers, lenders, community organizations all working together to create a more resilient system.

Speaker 1:

Okay, so let's put on our brainstorming hats here.

Speaker 2:

Yeah.

Speaker 1:

What are some of the concrete ideas that are being tossed around? What needs to change?

Speaker 2:

needs to change. Well, for starters, I think the foreclosure process itself is ripe for reform. It's often so long and complicated, especially for people who are already stressed and overwhelmed it's like navigating a maze, blindfolded.

Speaker 1:

So streamlining that process, making it more transparent and user-friendly, that can make a huge difference.

Speaker 2:

Absolutely. Imagine a system where homeowners have clear guidance every step of the way, where they understand their rights and options and where things move along more efficiently. That alone could prevent a lot of homes from ending up abandoned and in this zombie state.

Speaker 1:

I like it, what else?

Speaker 2:

Well, another big piece of the puzzle is expanding access to affordable housing options. To affordable housing options. We need to create more opportunities for people to find safe, decent places to live that they can actually afford, whether that's through new construction, rental assistance programs or even exploring some of these innovative housing models we're seeing pop up.

Speaker 1:

Yeah, we talked a bit about the tiny home movement earlier. Maybe we need to think more outside the box when it comes to housing, especially with costs rising and demographics shifting the way they are.

Speaker 2:

I totally agree. We need to be open to new ideas, new approaches, because the old ways aren't working for everyone. But it goes even deeper than that. Beyond just building more housing units. We need to address those fundamental economic issues that contribute to housing insecurity in the first place.

Speaker 1:

You're talking about stagnant wages, job insecurity, the rising cost of everything.

Speaker 2:

Exactly. If people can't afford to live in their communities, no amount of new construction is going to solve the problem. We need policies that support good paying jobs, that lift people out of poverty, that create a safety net for those who are struggling.

Speaker 1:

So it's like this two-sided equation right we need to increase the supply of affordable housing and at the same time, we need to empower people to actually afford that housing. It's complex, but it feels like we're starting to get a handle on the problem.

Speaker 2:

I'm optimistic. We're seeing more and more people waking up to these issues and there's a lot of energy, a lot of passion going into finding solutions.

Speaker 1:

I like your optimism, but you know, before we wrap up on this super hopeful note, I want to circle back to the individual level for a second. We've talked about big systemic changes, but ultimately, each of us has a responsibility to take control of our own financial well-being, right?

Speaker 2:

Couldn't agree more. We can't just sit back and wait for the government or the banks to fix everything. We all have a part to play.

Speaker 1:

So what are some concrete things our listeners can do right now to protect themselves, to be proactive, to build that financial resilience?

Speaker 2:

Well, step one educate yourself. Learn about mortgages, credit scores, how the housing market works. The more you know, the better equipped you'll be to make smart decisions.

Speaker 1:

Knowledge is power, as they say.

Speaker 2:

It's true, and don't be afraid to ask for help if you need it. There are so many resources out there, whether it's a financial counselor, a legal aid organization, even just a trusted friend or family member who can lend a listening ear.

Speaker 1:

You're so right. There's absolutely no shame in reaching out for support, especially when the stakes are this high.

Speaker 2:

Yeah.

Speaker 1:

Well, this has been an incredibly eye-opening deep dive for me. We started out talking about zombie foreclosures and we ended up exploring all these interconnected issues economic trends, social challenges, the very human cost of financial hardship and, ultimately, the power of resilience and community.

Speaker 2:

It just goes to show that even the most specific topic can lead to these bigger conversations, these broader insights about ourselves and the world around us.

Speaker 1:

And that's the beauty of the deep dive. We love digging into these complex issues, uncovering those hidden connections and hopefully sparking some thoughtful conversations along the way. So, to all our listeners out there, thank you for joining us on this journey. We hope you've learned something new, gained a fresh perspective and maybe even feel empowered to take action in your own lives. Remember, knowledge is only powerful if we share it and use it to create positive change. Until next time, keep exploring, keep asking questions and keep diving deep.

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David (Viacheslav) Davidenko

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