For the first time in Mecklenburg County, more than half of residential property sales last year involved a foreclosed home or one on the brink of foreclosure.

An Observer analysis of 2010 county government property data found that only 49 percent were traditional market sales between a willing buyer and seller. The rest were mortgages in trouble: sales at foreclosure auctions, resales by lenders and government housing agencies and forced sales by homeowners.

The examination shows:

  The foreclosure epidemic continues to spread beyond low-priced starter home communities to higher-end subdivisions.

  Distressed sales are dragging down the prices homes are selling for and the tax values now being assessed countywide.

A growing glut of unsold homes is dampening traditional sales and new home construction.

"The public has no idea how bad the residential real estate market is," said Bernard Helm, whose market research firm studies home sales in the Charlotte area. "If you want to know why the economy is not picking up, take a look at the condition of the residential real estate market."

Experts don't expect much improvement this year.

The newspaper's analysis found that traditional market sales of homes in the county have shrunk by almost two-thirds since 2002. Then, homeowners and builders sold 18,944 houses, townhomes and condos, according to county data. By last year, those sales withered to 6,376.

During the same time, foreclosures and other troubled sales skyrocketed from 592 to 6,614.

The newspaper's study focused on Mecklenburg's residential property sales in 2002 and 2010. They are the two years in the past decade that county appraisers combed through all sales to estimate a fair market value for each home, for the 2003 and 2011 property revaluations.

The rise in distressed sales has alarmed the county's revaluation team. In decades past, the county didn't factor in foreclosures when setting tax values, because they were anomalies in the market. Last year, revaluators started including the troubled sales. That resulted in reduced values in areas with concentrations of foreclosures.

Two years ago, the tax assessor's office estimated county home values might average 20 percent higher than the 2003 property revaluation. Three months ago, the office lowered that to 12 percent, then to 8 percent or 9 percent. Last week, its estimate was 6 percent to 8percent.

"This has been a colossal tragedy," said Mecklenburg revaluation team leader Chuck Hicks.

His group knew foreclosures would soar and property values would fall in the second half of 2010, after federal tax credits for first-time buyers expired. But unlike big bank failures or other busts in the economy, home prices "come down to Main Street and hit the average Joe in his home - the one thing he hopes to have equity and net worth in.

"Until those market prices come down, there simply will not be a demand from buyers. The market is going to continue to do its dirty work until that happens."

The drag of foreclosures on individual properties won't be known until the county mails out tax values in early February to about 280,000 owners. The calculations are made for each neighborhood, depending on its numbers and types of sales, along with other factors. County appraisers say that neighborhoods in south Charlotte and northern Mecklenburg, where foreclosures are few, have seen the biggest rise in values rise since the 2003 revaluation. Many high-foreclosure neighborhoods are down at least 10 percent.

Housing markets in Las Vegas, parts of the Pacific Northwest, Florida and other spots where real estate appreciated rapidly in the past 10 years are hurting as badly or worse than Mecklenburg, experts say, with high rates of foreclosures and falling home prices.

Behind every foreclosure and forced sale is a sad story, said Richard Borst, a consultant with Tyler Technologies Inc. who's helping Mecklenburg County estimate values for revaluation.

Many people hear the tales in their own neighborhoods, he said. One neighbor loses a third of his net worth because he has to sell cheap. Others owe more than their houses are worth. Still others lose their jobs, then their houses.

"It used to be rare," Borst said.

Beyond low-priced homes

In 2002, foreclosures in Mecklenburg County happened overwhelmingly to first-time homebuyers within a crescent of relatively new, stripped-down starter neighborhoods. These subdivisions were built on the backs of subprime and other shaky mortgages. Some also were built on shady real estate practices.

An Observer investigation in 2007 spurred a federal investigation into Beazer Homes, a major seller of high-foreclosure start-up homes in the Charlotte area. The U.S. attorney's office in Charlotte charged Beazer with mortgage fraud and accounting fraud. Beazer accepted responsibility for fraudulent practices and agreed to pay up to $50 million toward restitution for victimized homebuyers.

Today, with area unemployment over 10 percent, foreclosures in Mecklenburg bleed into pricier homes. The newspaper's analysis found:

Homes valued between $150,000 and $349,999 grab a bigger share of troubled sales. They went from 16 percent in 2002 to 28 percent last year.

Homes between $350,000 and $1 million made up just 2 percent of distressed sales in the 2003 revaluation. That climbed to almost 5 percent last year.

And homes with tax values of more than $1 million showed an uptick, from .3 percent to .8percent of all distressed sales. If that fraction seems small, it represents an extra 45 Mecklenburg homes valued at more than $1 million that were seized by lenders or ditched by their owners last year, compared with 2002.

Housing analyst Chuck Graham of Charlotte said the suffering in the higher end intensified in the wake of the recession and the financial crisis. Mecklenburg is hurt worse than its suburban neighbors, he said.

When easy credit brought a lot of new starter homes into the market, Mecklenburg got the largest share, Graham said. That end of the market has been eroded by foreclosures throughout the decade. Those homes priced $150,000 or less still made up two-thirds of all foreclosures and troubled sales last year, according to the Observer's analysis.

When Graham eyes the top of the housing market, however, he sees big problems.

Home prices in the top 4percent of the market in Mecklenburg and surrounding counties started at $968,000 in 2005, his analysis shows. It dropped to $625,000 by 2009.

"That's a big deal," Graham said, adding that a lot fewer consumers are buying high-end homes. Fewer speculative and custom homes are being built. "New inventory is heavily discounted: $1 million homes now sell for $700,000 or less."

The extreme ends of the market "are where the stress is," Graham said.

Almost no one sees signs of recovery soon.

One future predictor is foreclosure filings at the courthouse. They are a barometer of people at risk of losing their homes. Some will work out payment plans. Others will lose their homes.

Foreclosure filings generally have bounded upward in Mecklenburg and the state for the past decade. Mecklenburg had 4,414 filings in 2002, state court records show. In 2009, filings hit a record 12,767. The 2010 count of 12,176 doesn't show much improvement.

For a FREE Consultation and look at my marketing plan in the Lake Norman Real Estate market, visit http://www.realestatelakenorman.com or complete the form below. 

For complete information about properties for sale including Lake Norman Foreclosures, visit our website at realestatelakenorman.com