A Real Estate Silver Lining: Foreclosure Rates Plunge

RealtyTrac, the mortgage research firm, reports that foreclosures fell sharply in November. It may be a sign that the housing market has hit bottom. The company said, “its U.S. Foreclosure Market Report for November 2010, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 262,339 U.S. properties in November, a 21 percent decrease from the previous month and a 14 percent decrease from November 2009. One in every 492 U.S. housing units received a foreclosure filing during the month.”

The news may not be as good as it seems. The data could cause buyers and housing analysts to see a mirage.

“Foreclosure activity decreased dramatically in November, with fewer than 300,000 properties receiving a foreclosure notice for the first time since February 2009,” said James J. Saccacio, chief executive officer at RealtyTrac. “While part of the decrease can be attributed to a seasonal drop of 7 to 10 percent that typically occurs in November, fallout from the foreclosure robo-signing controversy forced lenders and servicers to hit the pause button on many foreclosures while they scrambled to revamp their internal procedures and revise or resubmit questionable paperwork.”

Other data indicates that the housing market may have stabilized. The number of homes with underwater mortgages has dropped below 11 million, according to some research. The reason for that is probably that banks have become more aggressive as they put unsold inventory on the market.

Research firm Zillow recently reported that total home values will drop $1.7 trillion this year after a fall of $1 trillion last year. Mortgage rates have begun to rise sharply. Buyers are still worried that home prices will go lower.

The problems with foreclosures due to unemployment will not disappear because the jobless rate is so high.

The foreclosure rate improvement is temporary, no matter how much banks and the federal government would like to believe otherwise. Once banks can restart their foreclosure machines, the RealtyTrac monthly number will certainly go back above the 300,000 level. With the backlog banks have, the figure may even hit 400,000 for a month.

The housing problem, if anything, is getting worse.

RealtyTrac notes: Despite a 20 percent monthly decrease in foreclosure activity, Nevada posted the nation’s highest state foreclosure rate for the 47th straight month. One in every 99 Nevada housing units received a foreclosure filing in November — nearly five times the national average.

Thanks in part to sharp monthly drops in foreclosure activity in Arizona, Florida, California and Michigan, Utah’s foreclosure rate leapfrogged to second highest among the states in November after being sixth highest the previous month. One in every 221 Utah housing units received a foreclosure notice during the month — more than twice the national average.

Douglas A. McIntyre