No matter how much better the real estate market appears to be or how much worse it actually is, two states cannot escape a collapse that has continued for three years. Californian and Nevada were hit by another round of huge foreclosures again last quarter.
RealtyTrac said, “U.S. Foreclosure Market Report for the third quarter of 2011, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 610,337 properties in the third quarter, an increase of less than 1 percent from the previous quarter and a decrease of 34 percent from the third quarter of 2010. The report shows one in every 213 U.S. housing units with a foreclosure filing during the quarter.”
“U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork,” said James Saccacio, chief executive officer of RealtyTrac. “While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up.”
The pace of foreclosures in California and Nevada has not slowed. It is likely to increase rapidly. There are pockets of unemployment in parts of the two states that are above 14%. These same areas often have home prices that are down by 60% or more from 2006. The portion of homes underwater is often more than half of those with mortgages. Taken together, it is a prescription for more and more foreclosures.
Nevada posted the nation’s highest state foreclosure rate — one in every 44 housing units with a foreclosure filing in the third quarter. California default activity also increased on a quarterly basis, and the state documented the nation’s second highest foreclosure rate — one in every 88 housing units with a foreclosure filing during the quarter, RealtyTrac reported. Contrast that to the national figure of one in 213. The inventory of foreclosed homes in these two states is large enough to undermine overall prices for years.
There may be no solution to the foreclosure problem, particularly in states with numbers so high that they are unimaginable. Long-term, home prices in these state will become so low that they will draw buyers. But most buyers know prices have further to fall. For the time being, there is a stalemate between desperate owners and frightened buyers. The buyers can afford to wait. That dynamic is more evident in Nevada and California than anywhere else in the U.S.
Douglas A. McIntyre
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