The number of foreclosures filed in the third calendar quarter of 2011 totaled 610,337, an increase of less than 1% from the second quarter and a drop of 34% from the same period a year ago. That’s not as good as it sounds.  The data comes from RealtyTrac, which also notes that foreclosures dropped by 6% month-over-month in September and fell by 38% compared with September of 2010.  The quarterly increase is being interpreted as a sign that foreclosure activity is picking up again as the robo-signing mess gets cleaned up.

Struggling homebuilders like Hovnanian Enterprises, Inc. (NYSE: HOV), PulteGroup, Inc. (NYSE: PHM), KB Home (NYSE: KBH), and others have a tough time competing on price with the thousands of foreclosed properties on the market in states like Nevada, California, Arizona, Michigan, and Florida. Big mortgage lenders like Wells Fargo & Co. (NYSE: WFC), Bank of America Corp. (NYSE: BAC), and JPMorgan Chase & Co. (NYSE: JPM) are not seeing a floods of buyers either, and even re-financings have slowed while interest rates are at their lowest level in decades.

In Nevada, where 1 house in 118 is in foreclosure, home prices actually rose in September by about 2.8%.  The median price for a house in the Las Vegas area rose to $123,400, compared with $120,000 in August, but still 8.6% below the $135,000 median in September 2010.

Total sales in the Las Vegas area, including condos, houses, and townhomes, totaled 4,108 in September, down from 4,693 in August, but up from 3,603 in September a year ago. Unemployment is 14.2% in Las Vegas. So who’s buying?

Investors paying cash are the likeliest suspects. And about 45% of the sales in August were bank-owned properties. The Mortgage Bankers Association’s weekly mortgage application survey still shows that nearly 80% of all mortgage applications are seeking refinancing at the historically low interest rates available.

All those sales around Las Vegas are existing homes, not new homes. And the expectation is that as the robo-signing issues are resolved, more foreclosed properties will come on the market, not only in Las Vegas, but all over the country. New home builders don’t stand much of a chance.

Housing market research firm Clear Capital expects home prices to fall by -1.6% in the fourth quarter of 2011 and another -3.2% by the end of the first quarter of 2012.  At least some of that pressure is due to the expected growth of foreclosed properties on the market.

And the banks? If you were a banker and a homeowner with a 6% mortgage came in and asked to re-finance at 4%, what would you say? If the homeowner was switching banks and has gold-plated credit, you might agree, but otherwise not likely. Given the headaches in the housing market, it wouldn’t be too surprising if all the big banks just decided to get out of the home lending business.

The housing market has seen its seasonal summer boomlet for this year. What’s left of this year won’t turn around a dismal year in the US housing market.

Paul Ausick

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.