NEW YORK (MainStreet) -- There's good news on the real estate front ... at least for now. RealtyTrac reports U.S. home foreclosures are at their lowest levels since 2007. Why the dip, and what's in it for consumers?
Economists and housing industry observers had expected foreclosures to rise in early 2012, after mortgage lenders had worked out a deal with 50 state attorneys general to make good on those toxic “robodoc” foreclosures that saw bad paperwork lead to bad foreclosures in the eyes of the government.
That actually was the case in February.
“February’s numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed,” noted Brandon Moore, CEO of RealtyTrac, in a March 15 statement. “Although national foreclosure activity was pushed lower by decreases in a handful of larger states, 21 states posted annual increases in foreclosure activity, the most states with annual increases since November 2010.”
While the two parties battled it out over the robodoc issue, many states had blocked foreclosures until a deal was reached. Now, a $26 billion deal between mortgage providers and state governments has freed up those foreclosures to start rolling again -- a scenario where many experts figured would lead to more foreclosures as banks and lenders played ‘catch-up” on delinquent mortgages.
That trend was expected to continue, RealtyTrac reported.
“The foreclosure and mortgage settlement filed in court earlier this week will help pave the way to a properly functioning foreclosure process by providing a clear roadmap for necessary foreclosures,” Moore added. “That should result in more states posting annual increases in the coming months. Not surprisingly, many of the biggest annual increases in February were in states with the more bureaucratic judicial foreclosure process, which resulted in a larger backlog of foreclosures built up over the last 18 months in those states.”
But that didn’t happen in the first quarter of 2012, as RealtyTrac reports in its monthly reading of U.S. foreclosures.
Earlier today, RealtyTrac released its first quarterly outlook on foreclosures, and found that they were actually at a 56-month low.
According to the real estate analytical firm, U.S. foreclosure filings -- which include default notices, scheduled auctions and bank repossessions – were down 2% from the last quarter of 2011, and 16% from the first quarter of 2011.
RealtyTrac also says that March numbers were the lowest monthly foreclosure numbers since July 2007. Foreclosures were down 4% from February to March, and the new monthly total was the first time U.S. foreclosures were under the magic 200,000 since July 2007.
So why the decline in foreclosures, when they were supposed to keep rising? Moore shrugs it off to a blip in the numbers that likely won’t last.
“The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated,” he says. “There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March. The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen — both in terms of new foreclosure activity and new short sale activity.”
That realistic, if sobering outlook tosses a bucket of cold water on what otherwise appeared to be a strengthening sign for the U.S. real estate market. But if the experts are right, don’t expect declining foreclosures to continue.