While there have been recent signs of renewed life in the nation’s housing market, the declining number of foreclosure filings might not be as encouraging as the data might suggest.
“The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated,” RealtyTrac chief executive Brandon Moore said in a statement. “The dam may not burst in the next 30 to 45 days, but it will eventually burst.”
A coming flood of foreclosures is expected in part because some states — such as Florida, California and New York — have a long backlog. It sometimes can take three years to complete the foreclosure process.
Many banks and mortgage servicers halted or dramatically slowed foreclosures in late 2010 after public revelations of widespread problems with flawed and fraudulent paperwork, further clogging foreclosure pipelines. But many market watchers expect foreclosures to ramp back up this year, after a $25 billion settlement over those “robo-signing” practices among five of the nation’s biggest banks and a collection of state and federal officials.
A new wave of foreclosures could further drive down home prices in the short term — even while helping heal the housing market over the long term by clearing backlogged inventories and getting distressed properties into the hands of new owners.
The RealtyTrac data show that California and Florida still lead the nation in foreclosure filings. California accounted for 23 percent of the country’s filings in the first quarter, with 133,245. Florida posted the second-highest total, with 73,344.
Struggles, however, persist across the map. Nationally, home prices have continued to fall in recent months, and the number of home sales has declined. U.S. borrowers collectively owe $700 billion more on their mortgages than their homes are worth. More than 11 million homeowners remain “underwater,” meaning they owe more than their houses are worth.
But many economists and housing experts see hints of better days ahead.
The nation’s job market has been improving, however slowly, leading to fewer borrowers falling into delinquency on their loans. Housing inventories have shrunk to more normal levels. Confidence levels among U.S. home builders have remained at their highest point in years. Permits for new housing construction have surged.
Despite those bright spots, many experts say it will be at least next year before home prices begin to rebound.