US Foreclosure Activity Slows Considerably

After a month of bad news about housing starts, existing home sales, and mortgage delinquencies, the number of homes going into foreclosure is slowing rapidly. RealtyTrac reported 308,524 U.S. properties foreclosures last month, a decrease of 2% from the previous month but still 6% above the level reported in February 2009. The data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population.

“The 6 percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac. The research firm admitted that severe winter weather may have slowed some foreclosure activity.

If the data is largely true, it could  indicate that federal programs to modify mortgages are having some effect and that banks may be slowing their foreclosures because they cannot find ready buyers for homes.

The one piece of especially bad news from RealtyTrac is that foreclosures are still running highest in the states that  have been most severely damaged by the housing crisis–Nevada, Arizona, California, and Florida. In these regions, foreclosures have a geometric effect.  The oversupply of houses drives down prices as they become vacant. As prices drop, the ability of people to sell homes is compromised because of the rise in underwater mortgages. The vicious cycle continues to press home prices down.

The RealtyTrac data probably does point to a positive trend in states that have not been hammered as badly as Nevada and California, which shows that the  recovery of the real estate market will be extremely uneven.