It’s not uncommon to see a flurry of home sales activity occur in the months during school vacation. Such was the case this year, as well.

In quite a few local neighborhoods, however, many of the newly-sprouted real estate signs have begun appearing in front of foreclosed homes that have stood vacant for years — with no sign of movement.

In the Bowling Brook Farms community, near Savage, at least five such vacant bank-owned properties, termed “zombie” foreclosures in the industry, went on the market nearly simultaneously, around the end of July. Other communities in the region have also been seeing a similar influx of dormant properties.

According to economists and industry experts, it’s probably no coincidence.

“I think there is a confluence of factors that has influenced lenders, indicating that this may be a good time to get these properties off the books,” said Anirban Basu, chairman and CEO of the Baltimore-based Sage Policy Group.

Multiple Factors

Chief among possible reasons for the sudden movement has been a recent reduction in mortgage rates, Basu said.

“Many of the real estate data sources also suggest that real estate prices are rising rapidly in the region and across the country,” he said.

Moreover, he said, housing inventory has become so low in certain areas that it is creating significant demand. “To be fair, there has been a lot of new housing construction activity recently, but it has primarily been focused on apartment and condo units, as opposed to [single family and townhouse units], Basu said.

Ilene Kessler, an Ellicott City Re/Max Advantage Realty associate who has been active in real estate sales for 32 years, said inventory rates for homes in her territory dipped and remained low until late June.

“Real estate is kind of like the food chain,” she said. “There’s always a chain of influences, and it usually takes a few months for the reaction to catch up.”

Zombie Hordes

On a positive note, the number of newly foreclosed home starts is decreasing locally, as well as nationwide.

RealtyTrac, a national source for comprehensive housing data, keeps tabs on foreclosures. In its latest (Second Quarter 2016) U.S. Residential Property Vacancy and Zombie Foreclosure Report, RealtyTrac’s data shows nearly 1.4 million vacant U.S. residential properties, representing 1.6% of all residential properties.

In a related report, RealtyTrac’s parent company, ATTOM Data Solutions, noted that national foreclosure starts dropped to an 11-year low in July, down 5% compared to June and down 19% since July 2015.

According to ATTOM’s report, foreclosure starts for July registered an 18.4% decrease from the previous year’s figure in Anne Arundel County, while Howard County registered a decrease of 40.9%.

In analyzing the overall picture, though, Maryland still ranks fourth in the nation among states with at least 100 zombie foreclosures, when considering the percentage of vacant foreclosure properties. The Old Line State’s figure of 7.2% is outpaced only by Oregon (11.8%), Indiana (9.5%) and Kentucky (8%).

Baltimore also ranks fourth in the nation among metropolitan areas with at least 100 zombie foreclosures, with its corresponding figure of 9.7% overshadowed by St. Louis, Indianapolis and Albany, N.Y.

Coincidence?

Real Estate Owned (REO) property holders may be reading the aforementioned confluence of indicators as the adjustment cue they’ve been waiting for, but Kessler suggested there may also be an elephant, or perhaps a donkey, in the room that hasn’t been acknowledged.

“In an election year. all bets are off,” she said.

Adding some credence to her observation is circumstantial evidence that the latest influx of local zombie properties hit the market in late July, around the time the Democratic and Republican National Conventions were wrapping up.

“Lenders may not want to take the added risk of waiting to see what shakes out,” Kessler said. “That may indicate a level of uncertainty on the part of lenders as to what the future holds in terms of possible new regulation or policy, once a new president is elected.”

Or it may not. Richard Green, a sales manager for Presidential Bank Mortgage, of Bowie, and the immediate past chair of the Maryland Mortgage Bankers Association, said he doesn’t put much stock in arguments of political uncertainty or trying to read market speculation tealeaves.

“To my thinking, it may actually have more to do with Maryland’s judicial process for foreclosure, which is one of the longest in the nation,” Green said.

An informational link on the Maryland Association of Realtors’ website makes a similar point and indicates that the long timeline has had a real impact on the trend of Maryland’s foreclosure data.

“Maryland lagged behind other states in dispatching foreclosures because the properties were so slowly processed through the lenders’ loss mitigation system and the courts,” the page notes, which resulted in a statistical surge between July 2012 and July 2013.

Green said he “wouldn’t find it surprising in this state to have homes sit vacant for several years while a lender goes through the judicial process, and then have them all hit the market at the same time when the group [of properties] has cleared.”

Threading the Needle

Nevertheless, the observations of national trend watchers suggest there may be a bit more to the current zombie influx than a local anomaly.

“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 RealtyTrac Senior Vice President Daren Blomquist.

“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,” he said.

If the movement in the local region is indeed intentional, it may be an indication of where bankers think the market is headed, Basu said, possibly toward a period of new housing construction and higher rates.

“What it comes down to for them,” he said, “is threading the needle and trying to make a good decision.”