Foreclosures Are Rising But Could Be For the Best

The number of foreclosure starts grew during the second quarter of this year from the year before, according to housing data company RealtyTrac Inc. While that may not sound positive, it may actually be the best thing for the housing market today.

Initial foreclosure notices rose 6 percent in the second quarter from 2011, marking the first year-over-year increase since 2009. Foreclosure starts increased in 31 of the 50 states, with California seeing an 18 percent jump in its initial foreclosure notices.

“The market has to deal with these distressed properties at some point and I believe we’ve delayed it long enough so seeing these increases isn’t necessarily a bad thing,” said Daren Blomquist, a spokesman for Irvine, California-based RealtyTrac in a BusinessWeek article. “The market has strengthened and is more equipped to absorb this additional foreclosure inventory.”

Mark Zandi with Moody’s Analytics Inc. agrees.

“It will hurt a bit over the next six to 12 months, but it is necessary to get housing and the economy on a solid foundation,” he said.

In the short run, this increase in foreclosures will likely bring home prices down as traditional sales continue to compete with distressed properties. But in the long run, it represents progress as banks start working through their “shadow inventories” of foreclosed homes. What’s more lenders seem to be doing a better job of modifying loans and allowing short sales, as actual house repossessions dropped 22 percent during the second quarter.

Another good sign is that mortgage delinquencies are falling as well. During the first three months of this year, the number of mortgages that were late by 30 days or more decreased to 7.4 percent from 7.58 percent in the last quarter of 2011, according to the Mortgage Bankers Association.

And all of this is keeping the housing market on track for recovery as CoreLogic Inc. reported that by April the nation’s shadow inventory had fallen to the lowest level in three years, an indiciation that homeowners are keeping up with their mortgages and banks are finding ways to avoid final foreclosures.

1 Comment »

on July 16th 2012 in Mortgage News

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One Response to “Foreclosures Are Rising But Could Be For the Best”

  1. Mike Woods from Indianapolis responded on 20 Jul 2012 at 12:28 pm #

    I agree 100%. It is really for the best that banks start to work their way thru the shadow inventory. The sooner it starts, the sooner the market can start to recover.

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