Foreclosure Activity Falls In First Quarter

There was less foreclosure activity in the U.S. in the first three months of 2011, but that doesn't mean the housing situation is improving. It could mean that banks have slowed the process because of increasing regulatory scrutiny.

RealtyTrac, an online foreclosure marketer, reports foreclosure filings - default notices, scheduled auctions and bank repossessions - were reported on 681,153 U.S. properties in the first quarter, a 15 percent decrease from the previous quarter and a 27 percent decrease from the first quarter of 2010.

But the situation isn't really improving

That sounds like good news, but if it is, it may be temporary good news.

"The nation's housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low," said James J. Saccacio, chief executive officer of RealtyTrac. "Weak demand, declining home prices and the lack of credit availability are weighing heavily on the market, which is still facing the dual threat of a looming shadow inventory of distressed properties and the probability that foreclosure activity will begin to increase again as lenders and servicers gradually work their way through the backlog of thousands of foreclosures that have been delayed due to improperly processed paperwork."

In other words, there could be a vast "shadow" inventory of homes destined for foreclosure, only the process hasn't begun yet. But chances are, it eventually will.

Nevada, Arizona, California post top state foreclosure rates

Nevada posted the nation's highest state foreclosure rate, with one in every 35 housing units with a foreclosure filing, despite a 10 percent decrease in foreclosure activity from the previous quarter. In a discouraging sign, Nevada's foreclosure activity in March  increased 35 percent from February after two straight monthly decreases.

Bank repossessions increased 26 percent in Arizona from February to March, helping to keep the state's foreclosure rate second highest in the nation for the first quarter: one in every 60 Arizona housing units received a foreclosure filing during the quarter. The state's first quarter foreclosure activity increased 15 percent from the fourth quarter - the second highest quarterly increase of any state - but was still down 17 percent from the first quarter of 2010.

First quarter foreclosure activity in California decreased four percent from the previous quarter and was down 22 percent from the first quarter of 2010, but the state still posted the nation's third highest foreclosure rate, with one in every 80 housing units with a foreclosure filing during the quarter. First quarter bank repossessions in California increased 17 percent from the previous quarter, while March default notices increased 28 percent from February.

One in every 98 Utah housing units had a foreclosure filing in the first quarter, the fourth highest state foreclosure rate, and Idaho posted the fifth highest state foreclosure rate: one in every 106 housing units with a foreclosure filing during the quarter.