Turning The Corner On Foreclosures


RealtyTrac is out with its April report on foreclosures and it might actually contain a grain or two of good news for the housing market.

First, here’s the relevant information:

During the month a total of 103,762 properties received default notices (NOD, LIS), a decrease of 12 percent from the previous month and a decrease of 27 percent from April 2009 — when default activity peaked at more than 142,000.

Foreclosure auctions (NTS, NFS) were scheduled for the first time on a total of 137,643 properties during the month, a decrease of 13 percent from the previous month — when auction activity peaked with more than 158,000 properties scheduled for auction for the first time. Auction activity was up 1 percent from April 2009.

Bank repossessions (REOs) hit a record monthly high for the report in April, with a total of 92,432 properties repossessed by lenders during the month — an increase of 1 percent from the previous month and an increase of 45 percent from April 2009. Bank repossessions were less than 1 percent above their previous peak of 92,182 in December 2009.

If you look at the repo and foreclosure auction data you’re missing the point. The ray of possible sunshine that I see is the decline in notices of default. Essentially, the number of homeowners that are falling into the pit is declining.

Now, that trend is only two months old and I wouldn’t be surprised to see a spike or two down the road, but it’s not beyond reason to suspect that we may well be past the point at which homeowner defaults are increasing. At some point we were bound to reach a turning point and there’s good reason to believe that we may well be there.

Yes, I know all about the millions of homeowners with negative equity, the likelihood that many loan modifications are going to fail and add to the foreclosure pipeline and the possibility that the banks are probably dragging their feet when it comes to borrowers that have simply quit paying their mortgages. That’s why I expect the NODs to spike a couple of times. Nevertheless, the numbers indicate to me that we are closer to the end than the beginning.

Sooner or later there was bound to be a diminishing universe of borrowers who were caught in the teeth of this disaster. Personally, I don’t think that as the number of foreclosures inevitably wanes that the housing market will inevitably roar back to life. That’s going to be entirely dependent upon the strength and duration of the recovery as well as the financing infrastructure we develop for home purchases and that’s a subject for another post.

You can leave a response, or trackback from your own site.

Leave a Reply