Have Foreclosures Peaked?

For weeks now, some brave contrarians have dared to suggest real estate might be beginning to turn around. While the news from that sector hasn't exactly been good, they say, it's been less awful. In other words, it's beginning to look like a bottom.

RealtyTrac today supplied some more less-awful news about the real estate market. The foreclosure marketer reports that foreclosure activity hit a 44-month low in July.

Foreclosure filings — which include default notices, scheduled auctions and bank repossessions — were reported on 212,764 U.S. properties in July, a four percent decrease from June and a 35 percent decrease from July 2010. The report also shows one in every 611 U.S. housing units with a foreclosure filing during the month of July.

“July foreclosure activity dropped 35 percent from a year ago, marking the 10th straight month of year-over-year decreases in foreclosure activity and the lowest monthly total since November 2007,” said James J. Saccacio, chief executive officer of RealtyTrac.

Not so fast

Wait a minute, skeptics are sure to say. Remember the robo-signing controversy that caused lenders to slam on the brakes when it comes to foreclosures? Aren't there millions of homes just waiting for a foreclosure notice?

True, but Saccacio says this delay just might prevent some of these impending foreclosures from ever taking place.

“It appears that the foreclosure processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts — including loan modifications, lender-borrower mediations and mortgage payment assistance for the unemployed — may be allowing more distressed homeowners to stave off foreclosure,” he said.

To be clear, Saccacio said he is not suggesting the market is about to rebound. After all, he notes, this decline in foreclosure is not based on a recovering economy. If it were, that would be a cause for celebration. He sees the current housing market woes extending into next year and beyond.

“A stabilizing economy and improving job market are the long-term keys to a housing market recovery," he said.

Location, location, location

Meanwhile, housing continues to suffer in some areas of the country much more than others. Ten states accounted for 73 percent of U.S. foreclosure activity in July, led by California, where 56,193 properties had a foreclosure filing during the month — up four percent from the previous month but still down 16 percent from July 2010. Initial default notices in California were down 6 percent from the previous month, but REOs increased on a month-over-month basis for the second straight month and scheduled auctions were up 11 percent from the previous month.

There were a total of 22,377 Florida properties with foreclosure filings in July, down six percent from June and down 57 percent from July 2010. Initial default notices and scheduled auctions in Florida were both down on a monthly and annual basis in July, while REO activity increased eight percent from June but was still down 55 percent from July 2010. The month-over-month REO increase in July followed monthly increases in initial default notices and scheduled auctions in June.

An 18 percent monthly increase in foreclosure activity helped Georgia post the nation’s third highest foreclosure activity total in July. There were a total of 11,461 Georgia properties with foreclosure filings during the month, still down nine percent from July 2010. The overall increase in Georgia foreclosure activity was driven largely by a 25 percent month-over-month increase in REO activity.

Michigan foreclosure activity in July decreased 16 percent from the previous month and was down 42 percent from July 2010, but the state still documented the fourth highest state foreclosure activity total for the month — 10,894 properties with foreclosure filings.

Illinois REO activity increased 20 percent from the previous month, and the state documented a total of 10,627 properties with foreclosure filings in July. Texas REO activity increased 15 percent from the previous month, and the state documented a total of 10,571 properties with foreclosure filings during the month.

Other states with foreclosure activity totals among the nation’s 10 highest in July were Arizona (10,098), Nevada (9,930), Ohio (8,376) and Wisconsin (4,534).