Foreclosures reached a 40-month low in April, and the news is more negative than positive. Real estate research firm RealtyTrac reported that its U.S. Foreclosure Market Report for April 2011 showed foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 219,258 U.S. properties, a 9% decrease from March and a 34% drop from April 2010. The report also shows one in every 593 U.S. housing units received a foreclosure filing during April 2011.
The silver lining had a cloud. RealtyTrac said a delay in foreclosure processing was the reason for the numbers and that foreclosures are likely to rise sharply again when banks sort out the trouble they have had with how home loan records are kept.
Most of the media will run a headline today that says “Foreclosures Reach 40- Month Low.” Readers may believe that this is because the housing collapse, which began three or four years ago, is over. People may assume buyers have finally entered the market. But buried below those headlines will be the bank issue which has temporarily slowed the process that throws people out of their homes.
Thirty-seven metro areas have home prices that are expected to increase more than 1% this year – a modest number compared to the 385 markets, Case Shiller says. Home prices in three quarters of these markets will fall again this year. Some analysts believe that home values may plunge another 10% to 15%. Buyers do not want to enter a market in which a sixth of their equity could disappear in one year. Historically low mortgage rates are not enough of an incentive to offset the fear that comes after those forecasts.
The collapse of the housing market may not have entered its final stage. RealtyTrac’s report shows that there will be a flood of foreclosures later this year or next. Banks have not foreclosed on as many homes as they would have liked. And, financial firms have about two million homes in their “shadow inventories,” which they own but have not yet put up for sale.
Foreclosures just reached a 40-month low. That figure could hit a 50-month high before too long.
Douglas A. McIntyre