Real estate - High interest rates: foreclosures on the rise in Hesse
Wiesbaden/Frankfurt (dpa/lhe) – Facing high interest rates, more houses and apartments in Hesse are coming under the hammer from distressed homeowners. According to the Real Estate Owners Association Haus und Grund Hessen, there were 1,949 new applications in 2023, a 15.7% increase compared to 2022. "We are looking at this development with concern," said Managing Director Younes Frank Ehrhardt. The good years for foreclosures seem to be over.
From 2019 to 2022, the number of applications had decreased, according to Ehrhardt, due to the significantly increased interest rates on new or supplementary financing. Some homeowners were put in financial difficulties by high mortgage rates, whose property on the open market did not find any buyers and then went into foreclosure.
Ehrhardt anticipates further increases in distressed sales in the future. "The introduction of the so-called Heating Law will not contribute to easing the situation," he said. It will rather have a significant impact on real estate prices. Potential buyers will consider the necessary modernization costs in the purchase price and may avoid older, unsanitized properties. Haus und Grund Hessen represents the interests of over 68,000 members, who collectively own 84.5% of the total housing stock in the state.
Foreclosures are a way for creditors to recover their debts. They usually occur when real estate owners find themselves in a financial crisis, cannot pay their mortgage or have debts. The creditor then initiates a foreclosure proceeding at the District Court. The minimum bid for the property is determined by an appraisal.
The proceeds are always property-specific, explained a court clerk at the Frankfurt am Main District Court. There were approximately 45% more foreclosure applications filed in the previous year than in the previous year 2022. "We have observed an increase in 'bidding frenzy' among potential buyers and bids above market value have been submitted," she reported. Creditors benefit from higher proceeds if their claims can be fully or largely satisfied, or even the original owners if a surplus remains.
In 2022 and early 2023, the highest bids were oriented around the 70% mark of the statutory market values, she explained. If the proceeds of a foreclosure sale are below 70% of the market value, the sale can be contested by the creditors on request. If the bids do not reach at least 50% of the market value, the court cannot approve the sale. At a potential second auction, these minimum thresholds no longer apply.
At attractive objects, there were also bids given regarding their market value, as the public prosecutor stated. "There were also dates where no one wanted to place a bid." The bids of the interested parties depended on their personal situation, the circumstances, the attractiveness, and the condition of the property, as well as the appraisals. Between appraisal preparation and the auction date, there were approximately six to eight months. "Perhaps the values set at that time in 2022 and the beginning of 2023 were too high for the then economic situation," the spokesperson added.
The Amtsgericht Kassel also recorded an increase in compulsory auctions. According to a spokesperson, there were 88 new proceedings in 2022, compared to 119 in the previous year. In both years, the proceeds were therefore above the market value on average. However, at the Amtsgericht Marburg, the number of proceedings decreased slightly. According to a spokesperson, there were a total of 23 compulsory auction proceedings in 2022, and 21 in 2023. "In the proceedings where a bid was accepted, the highest bids were usually below the market value – except for agricultural land, where the highest bid is usually above the market value," he explained.
The Hessian Ministry of Justice reported that a significant increase in compulsory auction proceedings could not be detected for Hessen. "The numbers for 2023 are significantly lower than those from 2014 to 2018 and roughly at the level of 2019 and 2020," a spokesperson explained. In 2014, the ministry recorded 4,224 applications, which successively decreased to 2,548 by 2018. In the years 2019 and 2020, 2,026 and 1,901 applications were recorded, respectively. The numbers for 2021 and 2022 were slightly declining (1,819 and 1,685), and for 2023, they were again slightly increasing, the spokesperson added. The compulsory auctions of real estate, according to the Ministry's assessment, were still at a low level in the long-term comparison.
- The increasing number of forced sales in Hesse is causing concern for Younes Frank Ehrhardt, Managing Director of Haus und Grund Hessen, as they represent over 68,000 members who collectively own 84.5% of the state's housing stock.
- Frankfurt's Local Court has witnessed a 45% increase in foreclosure applications compared to the previous year, indicating a potential trend in the real estate market.
- Ehrhardt predicts that the Heating Law will exert pressure on the real estate market, leading to higher real estate prices and causing potential buyers to consider modernization costs.
- High-interest rates have forced many homeowners in Hesse to resort to forced sales of their properties, leading to a surge in foreclosure applications according to Haus und Grund Hessen.
- Creditors benefit from higher proceeds in foreclosure sales if their claims can be fully or largely satisfied, or even if a surplus remains for the original owners.
- Wiesbaden's Real Estate Owners Association is closely monitoring this development in the future of the real estate market, with an emphasis on living conditions and the future impact of forced sales on the market.
