Foreclosure filings across the nation in the first half of 2011 are down 29 percent from the same period last year, but not because the housing market is healing, says a national real estate tracking firm.
“It would be nice to report that foreclosure activity is dropping as a result of improvements in the economy or the housing market,” said James J. Saccacio, chief executive officer of RealtyTrac.
“Unfortunately, with unemployment rates inching back up, consumer confidence weak and home sales and prices continuing to languish, this doesn't appear to be the case," Saccacio said, adding that paperwork delays were the main reason for the drop. "We estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012 or perhaps even later."
Lenders have slowed foreclosures because of legal problems with incomplete paperwork.
Tom Smith, an assistant professor of finance at Emory University, said banks may also be slowing foreclosures because they don't want the inventory on their books at at time when many of them are already wobbly.
"A lot of banks found that they foreclosed, then had these properties on their balance sheets and couldn't do anything with them. They short sell them or get rid of them in bunches. From a bank's perspective, a lot of this stuff really hurts the balance sheets," Smith said.
Georgia foreclosure filings also are falling, but remain near historic highs. The RealtyTrac report said Georgia has the fifth-highest percentage of properties foreclosed or under notice in the first half of this year, at 1 in every 66. The top four states were Nevada, with one in 21 homes repossessed or were under notice; Arizona, one in 36; California one in 51; and Utah with one in 60.
Equity Depot, a Kennesaw firm, reported last week that lenders have filed foreclosure notices on fewer than 10,000 homes and businesses a month for four straight months in metro Atlanta, the first time in more than two years the number has stayed below 10,000 for that long.
Barry Bramlett, the president of the company, said foreclosure notices through July fell 6 percent from the same period of 2010.
The slowdown in processing foreclosures is not necessarily good news for other homeowners.
Stephanie Herrod, president of the Westover Property Owners Association in Gwinnett County, said she has seen homes in her neighborhood sit untended for months after foreclosures. The association often gets stuck with mowing grass or maintaining properties during the limbo period when no one takes control of a home.
"We are really getting hit by distressed properties," she said.
The limbo period between families leaving a home and banks taking over creates uncertainty about shadow inventory -- homes that are not on the market but will be at some future point.
RealtyTrac's Saccacio referred to that effect in his company's latest report.
"This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number," he said.
Smith said uncertainty about inventory and price direction affects the consumer psyche. Potential buyers are not getting into the market because they are waiting for the prices to drop even further.
"Deflation is a signal to people to stop consumption and wait. If people believe for whatever reason the price of housing will continue to fall then it will continue to fall…because demand for housing will drop," he said.
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