The headlines are everywhere! ‘April Foreclosures at 40 Month Low’, ‘Colorado Foreclosures auction sales down 11.1% in April’, ‘Foreclosure Activity Continues Free-Fall in May’.
Is there really a downturn in Foreclosure activity? There is a saying ‘Numbers Don’t Lie’ – but in this case, they sure are masking the situation. Foreclosure numbers ARE down, but they aren’t down for the reasons we would hope. As reported in RealtyTrac.com’s June 16th press release (http://tinyurl.com/3r9n6b2) the amount of foreclosure filings were down 2% nationally from April and a 33% decrease from May 2010. Rather than a positive signal though, what we are REALLY seeing is a cosmetic decrease. The banks have decreased the amount of filings not because of a reduction in deliquent payments, but because of an internal decision to slow down or stall the process.
“Foreclosure activity decreased on an annual basis for the seventh straight month in April, bringing foreclosure activity to a 40-month low,” said James J. Saccacio, chief executive officer of RealtyTrac. “This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure.
The first delay occurs between delinquency and foreclosure, when lenders and services are no longer automatically pushing loans that are more than 90 days delinquent into foreclosure but are waiting longer to allow for loan modifications, short sales and possibly other disposition alternatives,” Saccacio continued. “Data from the Mortgage Bankers Association shows that about 3.7 million properties are in this seriously delinquent stage. The second delay occurs after foreclosure has started, when lenders are taking much longer than they were just a few years ago to complete the foreclosure process.”
So what does this mean for us? We really need to ignore the news about Foreclosure statistics. Instead, look around at the other statistics being provided and your local neighborhood. The economy produced only 18K jobs in June 2011 and the national unemployment rate stayed at 9.2%. This followed an increase of only 25K jobs in May. Economists had expected an increase of 125K in June. The unemployment rate has risen steadily from 8.8% in March 2011.
“It is about as bad as anyone could image,” said Nigel Gault, chief U.S. economist for IHS Global Insight.
“On face value it does suggest we are grinding to a halt,” he said.
How is there to be a housing rebound if the economy isn’t performing?
Let’s take a look around the State Of Colorado. According to the US Department of Labor the State unemployment rate in May is the same as it was in June 2009, fluctuating between 8.7% and 9.2% during that time.
How many homes are still facing foreclosure in your neighborhood? In Colorado 1 in 518 housing units received a filing in June (http://www.realtytrac.com/trendcenter/co-trend.html).
In the counties immediately surrounding Denver (Denver, Arapahoe, Adams, Jefferson and Douglas) there were 2154 foreclosure filings in May.
Nationally prices have reached their lowest point since March of 2009. Prices In Colorado have fallen .01% in June and .05% since the end of the first quarter. Year over Year the average home price has fallen 7.6%. With prices still falling a slowdown in foreclosure processing is bad news for housing recovery in our State. Housing expert Celia Chen, a housing market analyst for Moody’s Analytics, says all the negative data doesn’t bode well for a recovery
As the servicers sort out their processing issues and staff up a little that means these homes will end up on the market as a distress sale and that will cause home prices to fall further. It delays the problem. It extends the recovery in the housing market.
Nationally there are still over 3.7 million homes are in a late stage of foreclosure. Unless these homes are processed in a timely fashion we will continue to have negative pricing pressure in the market.
This is what frees up the economy to make forward progress and allows home prices to rise,” said Michael Englund, chief economist at Action Economics. “It will probably take about another year to work our way through the foreclosure mess.”
All together this data isn’t very promising. I am of the opinion that the foreclosure mess won’t be over for at least 2 years. Until the unemployment rate begins to fall we won’t see a housing recovery. The real concern now is whether this jobs data represents a double dip in the economy and a worsening of the housing picture.
If you are facing foreclosure in the Denver area please call my good friend Eric Nesbitt of the Nesbitt Law Offices at (303) 741-2354 to discuss you options. He offers a free 30 minute consultation and has helped many homeowners over the last few years.
