Why are foreclosure rates falling in the Twin Cities?
- Blog Post by: Jim Buchta
- June 14, 2012 - 4:05 PM
Foreclosure activity across the country and in the Twin Cities is slipping, but still far from normal levels. RealtyTrac said Thursday that the number of default notices and foreclosure actions sent to homeowners in the metro during May was down 6 percent decline from April and 7 percent from last year. By another measure, one in every 577 housing units in the Twin Cities got such a notice compared with one in every 639 housing units nationwide.
Across the country foreclosure notices were up 9 percent from April, but down 4 percent compared with last year. Brandon Moore, RealtyTrac’ CEO, said that the May decline was the 20th month of year-over-year declines, but that the month-to-month increase in foreclosure notices is a reminder that the recovery won’t be steady.
“It’s going to be a bumpy ride down to the bottom of this foreclosure cycle,” he said. Moore said that the declines are also an indication that the growing willingness of lenders to approve a short sale in an effort to avoid foreclosure. In addition, federal rules now impose severe penalties on lenders who make errors while processing foreclosures, so many are intentionally trying to avoid the foreclosure route.
Already, the decline in foreclosure proceedings is helping reduce the number of houses that are bank-owned and awaiting sale. Nationwide that “shadow inventory” as of April stood at 1.5 million units (mostly houses and condominiums), representing a supply of four months, according to a report released Thursday by CoreLogic. This was a 14.8 percent drop from last year when there was a six-month supply.
Erasing, or reducing that shadow inventory is a critical step towards a recovery in housing because those properties will sell at steep discounts, bringing down the price of similar properties.
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