Foreclosures Fall for 10th Straight Month – Home Prices Mixed

With foreclosure filings down again in July for the 10th straight month, it’s the lowest level since November of 2007. It’s a combination of processing delays and foreclosure prevention measures, with filings down 4% compared to June and 35% lower than July of 2010, according to RealtyTrac.

During July, RealtyTrac reports that 212,764 U.S. homes received some kind of foreclosure filing, notice of default, or notice of auction. Bank repossessions totaled 87,829, down 33.6% from the peak month of September, 2010, when banks took back 102,134 homes.
Banks are being much more careful since the robo-signing scandal, particularly in judicial foreclosure states. The paperwork and verification process has slowed to a crawl in many cases. Add to that the large number of government and private foreclosure prevention initiatives, and you find a large number of homeowners staying in their homes despite being in default, at least for now.

The hope is that fewer homeowners are now falling behind in their payments. This could be true if the recent figure of 60,000 initial notices of default is an indication. This is 39% fewer than in the same period a year ago. However, this drop could just be due to lenders stretching out the time before they make that first filing or notice. In California, the average sum of missed payments has jumped from $17,000 four years ago to $78,000 now. This definitely indicates that people are managing to stay in their homes longer after that first notice.

The National Association of Realtors just released their second quarter report of home prices. It was a mixed bag, with some areas up and others down. 27% of the tracked metropolitan areas experienced price gains from a year ago. That’s 40 of 150 metropolitan areas tracked. Four areas had double digit increases, one held steady, and 109 had a decrease in median prices. In the first quarter, 34 areas had posted median price increases.

The national median existing home price was $171,900 in the second quarter. That’s down 2.8% from the $176,800 in the second quarter of 2010. Distressed homes, typically selling at a 20% discount, accounted for 33% of second quarter sales, down from 39% in the first quarter and up from 32% a year ago.

Lawrence Yun, NAR’s chief economist, states that the housing market should be doing better considering high housing affordability, high rents, and low mortgage rates. However, he places the blame on the extremely tight lending environment. In the second quarter, the NAR Housing Affordability Index stood at 176.6, the third highest level on record. This index measures the relationship between median home price, median family income, and mortgage interest rates. The higher the index number the greater the household purchasing power. Recordkeeping began in 1970.

For real estate investors, it’s more of the same. Bargains are everywhere, rents are stable or rising, and there’s plenty of rental demand. There is still profit to be made in flipping and wholesaling as well.