Declining foreclosure rates have been one of the hallmarks of the U.S. housing recovery, but now some analysts are warning that the rate of decline may start to fade. CoreLogic reports that many states are facing a backlog in foreclosure processing and the elevated number of distressed assets will have a far-reaching impact on the housing market. Foreclosure forecasts vary from state to state and a majority of unresolved foreclosures exist in states that require a court ruling for them to proceed. The delay could mean a skewed reading of foreclosure progress in the long term. For more on this continue reading the following article from TheStreet.
The number of completed foreclosures continue to drop, but the pace of declines might moderate as some states continue to deal with a large backlog of distressed assets.
According to the latest report from CoreLogic, there were 51,000 foreclosures in September, unchanged from the previous month, but down 39% from the previous year.
The foreclosure inventory rate — percentage of homes in some stage of foreclosure — has steadily improved over the past three years. As of September 2013, it stood at 902,000 or 2.3% of all homes with a mortgage compared to 1.4 million a year earlier. This is roughly equivalent to 2009 levels.
Still, the number of completed foreclosures remains elevated. Prior to the crisis, completed foreclosures averaged 21,000 a month, half the current rate.
But the foreclosure picture varies from state to state. Two-thirds of the foreclosure inventory is concentrated in states with a judicial foreclosure process, which requires banks to prove in court that a borrower has defaulted.
For instance, in Florida, the foreclosure inventory rate remains at 7.4% compared to the national average of 2.3%. In New Jersey and New York, the respective foreclosure inventory rates are 6.5% and 4.8%.
The average time to foreclose on properties in these states is now more than three years.
With the bulk of the foreclosure inventory in these states, "the pace of overall improvement in the inventory will slow down and distressed assets will cast a long shadow over housing markets in states with judicial foreclosure," according to Mark Fleming, chief economist at CoreLogic.
This article was republished with permission from TheStreet.