Tuesday, December 18, 2012

Foreclosure inventory up, pre-foreclosures down...yet the song remains the same

by Blake Warenik, National Housing Conference and Center for Housing Policy

The good news: the rate of homes headed toward foreclosure continues to fall. The bad news: the foreclosure rate is near its all-time high. The rub: the percentage of homes in (or about to be in) the foreclosure process has not budged for the last two years.

The Foreclosure-Response.org team—my colleagues at the Center for Housing Policy alongside our partners at the Urban Institute and Local Initiatives Support Corporation—released the latest foreclosure and delinquency data for all 366 U.S. metro areas last week, including analysis for the 100 largest metro areas and maps for visual learners (a.k.a. humanities majors) like myself.

The story seems to be that there is no story: despite signs of a real housing recovery, including the biggest year-over-year jump in home prices since before the bubble burst and a bounceback in housing starts, the foreclosure crisis continues to drag on so long it's hard to continue calling it a crisis.

Digging into the data for the 100 largest metro areas, the rate of serious delinquency (combining the foreclosure rate with the rate of mortgages that are 90 or more days delinquent) stands at 9.53 percent, hovering between nine and ten percent as it has for the last eight quarters. But the makeup of the number has changed. While the percentage of homes headed toward foreclosure has fallen to 3.53 percent down from the December 2009 high of 5.48 percent, the share of homes in foreclosure has risen from around five percent in December 2009 to around six percent (where it sits for the third consecutive quarter).

The data can tell us a few things about why the foreclosure recovery has stalled out, plus a few details about the most affected areas:

  • The foreclosure inventory is growing. The data indicate that foreclosure starts have outpaced completions since March 2008, when Foreclosure-Response.org began tracking foreclosures.
  • Unemployment and delinquency are a circular problem. Unemployment impacts housing markets when borrowers struggle to make mortgage payments. Distressed housing markets make it more difficult for job-seekers to sell their homes when promotions or new opportunities become available in other areas.
  • Coastal metros are suffering more than the heartland. Metro areas in coastal states like California and Florida tend to have higher rates of unemployment and serious delinquency than areas in the Central U.S. like Texas and central plains states.

I'll leave it to the policy folks to answer how to deal what we hope has not become a new reality, but suffice it to say that foreclosure remains the most intractable problem left in the wake of the housing bubble and the Great Recession.

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