RealtyTrac recently reported that 1st quarter 2012 shows the lowest foreclosure filing activity since 2007. This news sent waves of cheerleaders spreading the news of improving real estate market conditions. Recently and more locally, Simi Valley and many parts of Southern California are seeing reduced inventory. This reduced inventory is giving the appearance that market conditions are improving. Low interest rates and reduced pricing are adding to this very rosy picture, but the underlying details cannot be ignored.
In RealtyTrac’s April 5, 2012 Forclosure Market Report, Brandon Moore, chief executive officer of RealtyTrac stated:
“The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated, there are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March. The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen — both in terms of new foreclosure activity and new short sale activity.”
As I mentioned in my Simi Valley March 2012 Market Report, Wells Fargo projects 2 million homes making up the shadow inventory that are up to 90 days behind in payment, with no filings or proceeding against those properties. Wells also projected another 6% decline in pricing for 2012. I am not sure that following the filing activity is going to do anything other than create more frustration. In my dealings with Short Sales over the last 3 years, many of the people in these properties are many months behind before starting the foreclosure process and that process takes another 4 months to complete. Understanding that the banks are trying to keep from flooding the market with foreclosures and approving more Short Sales, reports on filings can be misleading.
We still have a significant way to go before any real recovery can be claimed. The process is going slow and I do not see anyway the banks or the government will favor any plan to speed it up. Realtytrac’s report seems to support that stating that the average time for a foreclosure in California is currently trending at 350 days.
RealtyTrac’s report included the following for California:
Although California default activity increased from February to March — up 14 percent — the state’s overall foreclosure activity in the first quarter was down on a quarterly and annual basis. The California foreclosure rate still ranked second highest among all states in the first quarter, with one in every 103 housing units with a foreclosure filing.
This all is good new for home buyers and any chance of a run up in prices will be held in check by the distressed market. This is a great time to take advantage of low interest rates and prices that are at all time affordability levels.
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