Foreclosures drop to pre-crisis level

2007 - 5,075

2008 - 6,479

2009 - 9,930

2010 - 13,130

2011 - 9,953

2012 - 6,426

2013 - 3,650

Source: Equity Depot

WHY IT MATTERS

Foreclosures can have a devastating effect on home values, especially when there are a lot in one area. And that affects the whole economy because home values are part of the so-called “wealth effect.” When the value of assets such as homes or stocks fall, people feel less confident and are less likely to spend money and stimulate the economy.

The foreclosure crisis that torpedoed metro Atlanta home values has finally passed — at least by one month’s measure.

Foreclosure notices fell steeply this month, dropping back to levels unseen since 2006, before the housing bubble started to burst.

The drop marks the culmination of a steady decline in foreclosure notices since 2010. But it is unclear whether the sharp decline for August is a sign that repossessions have abated for good.

“Anyone reading anything into what’s going on, it’s just conjecture,” said Barry Bramlett, whose Kennesaw firm Equity Depot compiles the numbers for a 13-county region.”Everybody’s just guessing, it’s a guessing game.”

The 3,650 notices filed in August represented a 30 percent drop from July, and a 43 percent tumble from August 2012.

Foreclosure notices averaged 3,748 per month in 2006, before climbing to a peak of more than 13,000 a month in November 2010.

Bramlett said the numbers could again pick up if banks are waiting to foreclose on properties as home values — and therefore prices — continue to rise.

“We could have a tremendous other shoe drop,” he said. “We’ll see if it jumps back up.”

Others, though, say the change is in line with a housing market that continues to improve.

“It makes sense,” said Eugene James, the Atlanta regional director of the housing information company Metrostudy. “Prices are going back up. People who have more equity in their houses are less likely to give their houses back.”

James said the number of foreclosure notices may have fallen so drastically because fewer people need to begin the foreclosure process as a means of negotiating with lenders.

The number of institutional investors buying metro Atlanta homes before they go to auction may also have contributed to the reduction, said Daren Blomquist, vice president of RealtyTrac.

Still, Blomquist said, a lot of homeowners are still stuck in place — 36 percent of all metro Atlanta homeowners owe more on their homes than they are worth, according to RealtyTrac data.

So even if the long-term trend for decreased foreclosure notices continues, he said, there may still be months that see increases compared to August’s low levels.

“There will be a few more bumps in the road, but nothing will disrupt the downward trend,” he said.

As foreclosures decrease, so do short sales — negotiated sales where the bank accepts less than what is owed on a loan. Tom Breeden, a Realtor with Atlanta Communities Real Estate Brokerage, said between 2009 and 2011, 60 percent of the homes he sold were short sales. This year, he’s only done two short sales.

“People now are hanging on,” he said. “They’re not in financial distress.”

At the same time, he said, prices have yet to go up enough for it to make sense for many people to sell their homes.

Blomquist, with RealtyTrac, said improving foreclosure numbers increase the likelihood that more people will decide that it is worth the expense to stay in their houses, even if they owe more than it is worth. And James, with Metrostudy, said people will become more confident as notices stay low.

“It’s going to have a huge spiral-up effect,” he said. “It’s great to see. If you look at the entire real estate industry, it only makes sense that foreclosure activity would continue to slow down, as well.”