There is no doubt that the real estate market is making progress toward recovery with significant year-over-year progress, especially when you look at foreclosure news; however, is the decline in foreclosure starts here to stay or is it simply temporary?
At the end of the day, the answer to this question will depend on who you ask. Some people believe that foreclosure starts are declining as a result of true real estate market progress, while others believe that the decline is primarily due to the mortgage settlement agreement. In actuality, both are probably true to some extent.
CoreLogic Report: Foreclosure Activity Declines 17%
According to CoreLogic’s National Foreclosure Report, a total of 58,000 foreclosures were completed in October, which is 17% less than what was reported in October of 2011. Furthermore, the number of completed foreclosures fell 25% from September to October, showing signs of very strong month-over-month gains.
The report indicates that some states are doing rather well. For example, South Dakota only had 19 foreclosures within the last year and their foreclosure inventory is a mere 1%. In comparison, Florida had 95,000 over the last 12 months and their foreclosure inventory is 11.1%.
Mortgage Settlement Agreement Decreases Foreclosure Activity
The report from CoreLogic are definitely positive and has done a lot to improve investor confidence in the real estate market; however, some people believe that the decrease in foreclosure activity is merely temporary and is primarily a result of lenders seeking to fulfill the requirements of the mortgage settlement agreement.
The agreement requires lenders to provide a 14-day notice to homeowners, which could essentially delay the foreclosure process. This would be similar to what happened with judicial foreclosure states - initially the states were not hit hard; however, now these states are still struggling since their foreclosure process simply delayed the inevitable. Although this is possible, it is unlikely since we are only talking about 14 days and not months.
Short Sales and Decline in Foreclosures
Others believe that other aspects of the mortgage settlement agreement, such as encouraging homeowners to opt for short sales and loan modifications, are contributing to the decline in foreclosures. With many lenders offering incentives for homeowners opting for short sales instead of foreclosure, the foreclosure rate is going to decline.
So, the question is not whether the mortgage settlement agreement, especially encouraging short sales, is affecting the foreclosure rate (which we know is true). Instead, the question is whether the real estate market is truly making progress toward recovery and if foreclosures activity will continue to improve - even when the mortgage settlement agreement is no longer around.
We believe that the answer is yes. The real estate marketis making progress toward recovery and although the mortgage settlement agreement may be inflating the progress in foreclosures, we still believe that progress is being made and will continue to be made throughout the foreseeable future. Although the progress in foreclosures may slow down once the mortgage settlement agreement comes to pass, we will continue to make slow but steady strides toward real estate market recovery.
Below is a video on rising home prices throughout the country - another sign of real estate market recovery: