Foreclosure Inventory Backlog Easing Up?
For the first time in a year foreclosure sales outpaced completed foreclosures--which dropped by 24% at yearend 2011 contributing to a notable decrease in the foreclosure inventory. Yet the answer to those wondering whether the foreclosure inventory backlog is really easing up appears to be: No.
“The current ‘visible’ housing inventory vastly underreports foreclosure inventory that must be burned off,” said Ed Sullivan, chief economist for the Portland Cement Association at the 2012 International Builders show in Orlando. “Adverse implications for months of supply calculations and home price delay signals to homebuilders to increase activity and puts off recovery.”
In his view the 1.9 million foreclosures reported in 2011 is understated by over 1.0 million still in the pipelines due to the foreclosure delays.
Like most homebuilders Sullivan is not impressed by the “small improvements to the economy” and worry about bank processing delays that are pushing foreclosures into 2013 and “drag down housing starts.”
CoreLogic findings however are slightly more optimistic. Data indicate servicers “stepped up the rate” of processing distressed assets in December 2011, CoreLogic said, increasing the distressed clearing ratio that compares the number of the REOs sold with that of completed foreclosures or new REOs—from 0.94 in November 2011 to 1.03.
It means the REO inventory is clearing faster thus shrinking the inventory of foreclosed properties.
According to Mark Fleming, chief economist with CoreLogic, while foreclosure filings continue to be curtailed by a variety of judicial and regulatory constraints, “mortgage servicers are completing REO sales faster than they are completing foreclosures.”
Completed foreclosures for all of 2011 totaled 830,000, down from 1.1 million in 2010. It brought the yearend foreclosure inventory to 1.4 million REO properties.
The first national CoreLogic Foreclosure Report of monthly data on completed foreclosures, foreclosure inventory and 90-plus-day delinquency rates also shows that since from the start of the financial crisis in September 2008, there have been approximately 3.2 million completed foreclosures—the current inventory is approximately 56% lower than its peak in 2008.
Nationally, the number of loans in the foreclosure inventory decreased 8.4% (130,000 properties nationwide) in December 2011 compared to December 2010, following a 5.3% decrease in November 2011.
Both improved REO sales rates and a 7.3% decrease in December 2011 in the share of seriously delinquent borrowers who were 90 days or more delinquent on their mortgage payments, including homes in foreclosure and REO, compared to 7.8% in December 2010 indicate that regardless of the much-talked-about shadow inventory problem the foreclosure market is changing for the better.
The new data from CoreLogic also shows that nationally 1.4 million homes, or 3.4% of all homes with a mortgage, were in the foreclosure inventory as of December 2011 with roughly one-third of homeowners own their homes outright.
“Despite the clog in some markets” due to the widespread shadow inventory, says Tom O’Grady, president and CEO of Pro Teck Valuation Services, a number of economic indicators and housing market statistics have improved in 2012. Sales activity is up while the inventory of homes for sale is declining.
New metrics from the January HomeValueForecast.com, a monthly report provided by Pro Teck Valuation Services, Waltham, Mass., that analyze the distressed real estate inventory confirm what industry insiders have been stressing during the past few years: All real estate is local.
HomeValueForecast.com offers sales information, listings and off-market activity for 90% of the U.S. housing stock from a national, regional and ZIP/neighborhood level perspective.
Findings, HomeValueForecast.com analysts note, show that while state level variations in distressed real estate inventory are affecting the path to recovery, home prices will improve in the coming year “with more significant increases in future years since new construction has been running at only half the rate of long term demographic demand.”
Similarly to CoreLogic and other hosuing market data providers HomeValueForecast.com’s micromarket data focus on two main drivers: the rate of new foreclosures and the rate of exit from the inventory via REO sales—which “have proven particularly useful” in predicting both the timing and the magnitude of the home price declines that have occurred in the nation’s real estate markets since the peak in 2005-2006.
National maps of local market variations, however, seem to have their own consistency of sorts.
According to CoreLogic, as of December 2011 Florida remains at the top of the nation’s highest foreclosure inventory rating at 11.9%. It is followed by New Jersey with 6.4% and Illinois 5.4%, both relatively new in the top five category. Meanwhile, Nevada, consistently the No. 1 foreclosure state in the nation in the recent past has dropped to fourth place with 5.3%.