Foreclosure News Is Finally Good

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Foreclosure rates are one of the proxies for the health of the housing market, along with housing starts, home prices and the number of underwater mortgages. During 2011, foreclosure rates  improved for the first time in four years. It is a sign, perhaps the first real one, that housing has bottomed and tentatively is on its way back up.

RealtyTrac reported that:

Foreclosure filings were reported on 205,024 U.S. properties in December, a decrease of 9 percent from the previous month and down 20 percent from December 2010. December’s total was the lowest monthly total since November 2007 — a 49-month low.

RealtyTrac management usually adds reasons why the trend may not continue when it releases it monthly results. This month, they did not. The numbers were pure good news.

All housing trouble is local. Since 2006, the localities have been in California, Nevada, Arizona and Florida. The trends in these markets improved last month. That says a great deal because the glut of homes in these regions has stayed high. Prices have continued to drop as well. Ironically, that may finally be a good thing. Married with low mortgage rates, a supply of homes on which owners have dropped prices or for which banks have put up for less than market value, may have caused activity to slow.

On an even more local basis, foreclosures in the 20 hardest hit markets declined in every case. Many of these cities have very high unemployment, particularly Las Vegas and the cities inland in California, which include Stockton, Riverside and Fresno. The jobless rate in these cities is still well above 10% in most cases. But housing has begun to stage a small recovery. Foreclosure rates in these places are still high, but they are not racing higher.

The RealtyTrac data, taken with modest increases in consumer activity and low mortgage rates, mean that the destruction of the U.S. housing market may be coming to an end.

Douglas A. McIntyre