As the housing market heals, home foreclosures are slowly declining.
The latest figures from RealtyTrac, a real estate information provider, indicate that total foreclosure activity in April dropped to the lowest in more than six years. Does that mean it is no longer a crisis?
In this seven-and-a-half-minute conversation, I talk with Daren Blomquist of RealtyTrac about:
- Being "halfway back to normal" in the pace of foreclosures.
- The impact of foreclosures on house prices.
- Whether the best time to buy has already passed.
- Which states are lagging on the path to recovery.
Is the foreclosure crisis easing?
Mark Hamrick speaks with Daren Blomquist about the persistent foreclosure problem and where it stands.
LISTEN TO AUDIO
Mark Hamrick: Hello. I am Mark Hamrick, Washington Bureau Chief for Bankrate. For years now, the words foreclosure and crisis have been uttered hand in hand. But the breadth of the problem has been easing as underscored by the latest figures issued by real estate information provider RealtyTrac. It reports foreclosure activity in the month of April 2013 was the lowest since February 2007, marking a 74-month low. Joining me now to talk is Daren Blomquist, vice president and spokesman for RealtyTrac. Daren, welcome.
Daren Blomquist: Thank you for having me.
Mark Hamrick: We wouldn't really suggest for a second, Daren, that when an individual or a family is facing foreclosure that it is not a crisis for them; but how do you view this situation now? Does it still feel like a foreclosure crisis?
Daren Blomquist: No, it doesn't. It feels like the foreclosure crisis is really over. Now we are still dealing with some hot spots in terms of foreclosure activity, but it is more of a lagging thing. It is markets that were not able to absorb the foreclosures as quickly that are now still dealing with the leftover wreckage of the housing crisis. But the problem is not accelerating. It is decelerating and so things are getting better. We can definitely see the light at the end of the tunnel with this foreclosure problem.
Mark Hamrick: And what is it that slowed things down? I know it is complicated, but in some cases it was essentially the political system, right?
Daren Blomquist: Right. There are a couple of issues at play. One is just the type of process that the state uses. Some states use a process that is much more susceptible to delays in processing foreclosures. The other thing is, just to oversimplify probably, is government intervention on the part of the federal government, state governments passing legislation, state courts ruling against lenders and slowing down how quickly they can foreclose. And so yes, there has been a lot of political pressure to prevent unnecessary foreclosures, and that has slowed things down.
Mark Hamrick: So you guys report sort of month over month and relative to a year ago, and so April foreclosure activity was down 5 percent from March and down 23 percent from a year earlier April 2012. Where are we now relative to the peak of the crisis?
Daren Blomquist: We are halfway back to normal is the way I would put it. At the peak we were seeing 30 straight months of over 300,000 properties with foreclosure filings every month nationwide. Now we are down to 150,000 a month on average over the last few months. And so we are getting back -- I would put normal right about at 50,000 to 75,000 properties with foreclosure filings a month. So we are about halfway back to normal nationwide.
Mark Hamrick: And of course, foreclosures have had broad impacts on all of us ranging from the tremendous damage to the financial system and the economy, and then many on a personal basis to depressing home prices more broadly. Are we seeing less impact on home prices now from foreclosures? Obviously, we have the national picture, then we have individual markets as well.
Daren Blomquist: Yes. I mean foreclosures, even before the housing crisis, consistently sell at what we would call a discounted price or a price that is below the average price of a nondistressed property. With that said, we are not seeing that foreclosures are having the overall impact on home prices that they were during the peak of the crisis, where there were just so many foreclosure sales happening as a percentage of all sales that they were dragging down overall home prices. Now the market is able to absorb those foreclosures even though they are selling at a discounted price without a huge hit to overall home prices. And the other factor that is in play here is somewhat I think was surprising to a lot of folks is suddenly there is a sense that there is a lack of inventory available for sale. And that is not just a sense, it is reality in many markets that there are just not very many homes for sale because you have a combination of the foreclosures going down and then a lot of homeowners who are still underwater and are stuck in their homes or are not listing their homes for sale. You have this shortage. And that is helping to keep home prices propped up and accelerating.
Mark Hamrick: So then for buyers of homes, does that mean in many cases the best bargains have already been had?
Daren Blomquist: Yes. Yeah, unfortunately. I mean if you are trying to time the bottom of this market, you have probably missed out. I mean if you really want to buy at the bottom, you usually are going to be buying when everybody else is saying don't buy and everybody else is scared of the market. And that would have been back in 2009-2010 to really hit the bottom. And those markets now, I think there are some markets again that are lagging and where there are going to be, there is more opportunity for foreclosures to be had at a bargain price going forward, but for the most part, we are past the absolute bottom.
Mark Hamrick: Now you reported that scheduled foreclosure auctions were sharply higher in a number of states: Ohio, Maryland, New Jersey, Oklahoma. What are scheduled foreclosure auctions and what does that tell us about the problem generally, if anything?
Daren Blomquist: Sure. It is actually, I think, news that these states -- and the states you named, places like Ohio, Illinois, Florida, New Jersey, Maryland -- are all those states that are lagging a little bit here with the foreclosure problem and taking more time to absorb the foreclosures. These foreclosure auctions in these states are the second step in the process of absorbing the foreclosures. The first step is the initial foreclosure start. We saw big increases in those foreclosure starts last year. Now that "pig in the python" is progressing to the second stage, these foreclosure auctions where the property actually is put up for auction, usually on the courthouse steps, and bidders can come and bid on it or the bank. If there is no third-party bidder that takes back the property, then the bank takes back the property at that auction.
Mark Hamrick: And so then the logical question to follow through from that is the most dreaded part of the process with the home repossession. Where are those numbers right now?
Daren Blomquist: Now those are still dramatically down even in many of these states that have the longer foreclosure process, the judicial foreclosure process, those are still down. In fact, the REOs or bank repossessions were at a 69-month low in April nationwide. And so those are continuing to head down. But I do think that, just like we saw foreclosure auctions spike in many states early this year, probably either later this year or even into next year we will see a corresponding spike in those bank repossessions as those make their way through the process.
Mark Hamrick: Well, generally it sounds like these are more hopeful signs. So, Daren, thank you.
Daren Blomquist: Thank you very much.
Mark Hamrick: I have been speaking with Daren Blomquist with RealtyTrac. For more on this and other personal finance issues, visit Bankrate.com. I am Washington Bureau Chief Mark Hamrick.