Desert Luxury Realty
The financial crisis seems almost a ghost of history now that home prices and sales are rising. Foreclosure rates, another key indicator of the Great Recession, have also plummeted in the past year, down by 25 percent, according to a new study released by Lender Processing Services (LPS).
The new data from LPS mirrors what others have been saying about foreclosures. The National Association of Realtors recently reported that the number of distressed sales is down by 3 percent from last month. Lower rates of foreclosure and short sales can be attributed to the overall improving housing market, including record low mortgage rates and new government-sponsored refinancing programs. The Making Home Affordable initiative helps underwater homeowners refinance mortgages at lower interest rates to avoid foreclosure.
The LPS report also found that the number of homeowners in delinquency - loans that are 30 days or more past due - has fallen drastically since July 2008. At a rate of 6.5 percent, more than 9 percent less than year-prior levels, delinquency is down across the U.S. The five states with the lowest rate of overdue loans are Montana, Wyoming, Alaska, South Dakota, and North Dakota, according to the LPS. However, there are still more than 3 million properties underwater. The states hardest hit in the crisis - New York, Nevada, and Florida - still have the highest rates of delinquency.
Foreclosures strongly impacted the duration of the housing crisis, forcing many homeowners to move in with parents or rent. Gains in home prices before last year were limited due to the amount of shadow inventory in the market. Jann Swanson of Mortgage News Daily reports that shadow inventory of foreclosures is up from last year as a result of the National Mortgage Settlement. “U.S. foreclosure inventory has increased by about 12 percent since May 2012 when it hit a five-year low of 1.3 million properties,” writes Swanson. “Today, that inventory stands at about 1.5 million and is up 9 percent from the first quarter of 2012.”
While foreclosure inventory is up, the rate of new foreclosures is in decline. In fact, inventory is down from its 2010 peak by nearly 1 million. Daren Blomquist, vice president of RealtyTrac explains how the National Mortgage Settlement relieves pressure from foreclosures. “The settlement provided some closure regarding accepted foreclosure processing practices, and as a result lenders have been reviving more of these delinquent loans and pushing them into foreclosure over the past 12 months, particularly in states where a lengthy court process has resulted in a bigger backlog of non-performing loans still in snooze mode,” Blomquist said.
Distressed sales of foreclosed homes or short sales bring down the market value of property. However, as the rate of foreclosures continues to decline, housing prices will soon reflect market value.