Long foreclosure sale proceedings that require court intervention are holding back the housing recovery in the hardest-hit, judicial-foreclosure states and by default, the economy at large, according to findings from a Pro Teck Valuation Services report.
The October 2013 Pro Teck Valuation Services Home Value Forecast adds new proof to what other industry data, including most recently the Mortgage Bankers Association’s third-quarter delinquency report, have been proving all along. State law continues to negatively affect the recovery.
In California, a nonjudicial foreclosure state and one of the hardest hit by the housing crisis, even the local markets that have been turning around at a slower pace compared to its peers are seeing a much faster recovery than equally stressed local markets in judicial states in Florida and Illinois that remain in the bottom 10.
Eight of the top ten recovering metro areas in the nation are located in California where foreclosure law did not interfere with the market forces.
“Peak foreclosure activity came and went,” banks were able to move swiftly to cut losses and many markets are now on the rebound, says Tom O’Grady, CEO of Pro Teck Valuation Services.
The change is significant since “only two years ago much of the bad news was centered on California,” he says. “Foreclosures were driving down prices and there were high REO discounts,” but as a result the market started to stabilize.
The Pro Teck report examines the 10 best and 10 worst performing single-family home markets in the nation’s 200 largest metro areas. Evaluations are based on real estate market indicators including sales listing activity, prices, months of remaining inventory, days on market, and foreclosure and REO activity.
California’s recovering markets “have less than four months of inventory and are averaging more than 20% year-over-year appreciation,” O’Grady says.
Another recovery indicator in California is that nearly 10% of all sales are foreclosures. Supply-demand fundamentals in these nonjudicial state metro areas have returned, he says, and “should help lead to a sustainable recovery.”
In October the top performing CBSAs besides Minneapolis-St. Paul-Bloomington, include California’s Modesto, Sacramento, Los Angeles, Santa Rosa and San Diego.
Florida’s Orlando, Miami and Tampa are among the nation’s worst performing CBSAs.
“It’s hard to sustain a market turnaround when 25% to 50% of sales are foreclosures,” says O’Grady. “A stable market cannot return until foreclosures play a less active role in the market.”