Declining foreclosures point to normal market
Home foreclosures continued to decline in the third quarter to levels not seen for more than a decade. That’s nothing new. Over the past two years, numerous studies have pointed to a declining number of distressed properties.
What is new is that the time to complete a foreclosure is now also going down, Attom Data Solutions says. That’s an indicator that states have pushed their backlogs of distressed properties through the foreclosure pipeline. It also is a sign that the housing market is returning to normal, said Daren Blomquist, senior vice president with Attom Data Solutions.
“We’ve known for a long time that we are heading back to normal in terms of the activity numbers,” Blomquist told Scotsman Guide News.
“There are two things that changed. We saw the monthly activity of foreclosure filings finally return to precrisis levels below 85,000 properties a month,” Blomquist said. “The second big thing is that we saw the average time to foreclosure decrease for the first time since we have been tracking this.”
Blomquist said quicker foreclosure timelines indicate that banks have worked through the bulk of the Recession-era foreclosure backlog in most states, and most foreclosures completed now are more recent defaults.
On a national basis, it took an average of 625 days in the third quarter to complete a foreclosure, down five days for the same quarter a year ago. Attom Data Solutions (the former RealtyTrac) began tracking foreclosure timelines in the first quarter of 2007. The average time to complete a foreclosure has never before dropped in a quarter on a year-over-year basis since the company began tracking the data.
The average time to complete a foreclosure also fell in 19 states, and was down significantly in a few hard-hit states that had a high number of distressed properties, including Nevada, Massachusetts and Michigan, Attom Data Solutions said. Foreclosure filings totaled 293,190 U.S. properties in the third quarter, down to a level last seen in 2005.
Blomquist saw no immediate threats that would cause another downturn the housing market, but cautioned that pockets of the country have not recovered.
“It is important to say that this is a national return to normal,” Blomquist said. “There are definitely still some trouble spots across the country that have not worked their way through the crisis.”
A more stable market
In an interview this month, title company First American’s chief economist, Mark Fleming, said the housing market was largely stable, with fewer foreclosures and rising equity levels. He wouldn’t call the market normal yet, however.
“We are still working off some of the hangover,” Fleming said. “Clearly, it has been trending for a few years now in the right direction, approximating back toward normal.”
Fleming said the extremely low interest rate environment of the last few years has not been normal. Low rates have encouraged people to borrow money and purchase homes, driving up home prices. Fleming says that homes are still affordable in real terms, but eventually interest rates will tick back up, which could slow down the market.
“The nominal house gains are, in large part, leverage driven,” Fleming said. “The challenge of calling a housing market healthy is that we are actually switching over from a long run, historical tailwind caused by low rates [that brought] benefits to the housing market.
“In our modern housing era and our collection of data, we have not experienced that kind of a tailwind,” Fleming added.
CoreLogic Chief Economist Frank Nothaft said foreclosures have ticked up in some oil-patch areas that have suffered job losses from the drop in energy prices. He mentioned North Dakota and also the cities of Odessa and Midland, Texas. Nationwide, there were 37,000 completed foreclosures in August, down 42 percent from the same month a year earlier, CoreLogic reported.
"We are not quite back yet," Nothaft recently told Scotsman Guide News. "The foreclosure rate [and] the serious delinquency rate are back to the levels they were in 2007. It is good that we have come down from the really elevated default rates that we have seen for much of the last nine years, but they are still elevated compared to the history."