Foreclosures Fall In Most Cities

RealtyTrac reports that foreclosures fell in more than 84% of U.S. metro areas during the first half of the year. Don’t get excited though, as the same report states that this doesn’t indicate a turn-around in the market and foreclosure filings.

These dramatic decreases merely indicate that the foreclosure pipeline is still clogged in many local markets. The foreclosure rate has fallen by 29% over the last 12 months. Much of the backlog is due to slow sales of already foreclosed homes, and banks slowing the rate at which they’re willing to bring more to market in order to slow price decreases.

Then there is the slowdown in all phases of the foreclosure process due to the “robo-signing” scandal. A great many filings are being delayed by the banks while they double-check their procedures. Couple that with bankruptcy and foreclosure judges focusing more attention on whether they’re following the law and you get gridlock in many areas. This is proved by the fact that the biggest decline in foreclosures has been in “judicial foreclosure” states, where judges are involved.

- Florida – Before the scandal, Florida claimed nine of the top 20 metro areas with the highest foreclosure rates during the first half of 2010. This year, there is only one area, Cape Coral, with 52% fewer foreclosures compared to the same period in 2010.

- Las Vegas – Las Vegas is still the area with the highest rates of foreclosure. One in every 19 homes are at some point in the foreclosure process. That’s six times the national rate of homes either in possession of a default notice, a notice of sale, or a bank repossession.

In a statement of the obvious, Standard & Poor’s Case-Shiller Home Price Index states that trends in home prices and foreclosures are closely tied. Price drops and foreclosure events in 20 cities tracked are correlated at 87%. However, the drop in foreclosures isn’t bringing higher prices now, simply because there is plenty of current inventory.

For Investors

Real estate investors, particularly those who are buying properties to hold as rentals, can look forward to continued bargains, and at some point another round of foreclosures putting more downward pressure on prices.