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Housing Update: Foreclosures Drop to Pre-Recession Levels, Analysts Remain Cautious

RealtyTrac is reporting today that foreclosure filings have dropped in some of the hardest hits states and, nationwide, foreclosure activity is at its lowest level since 2007. Filings, which include notices of default, scheduled auctions  and bank repossessions totaled 531,576 in the third quarter of 2012, which represents a 5 percent decrease from the second quarter and an overall decrease of 13 percent compared to the same period in 2011.

Daren Blomquist, VP of RealtyTrac says of the numbers: “We’ve been waiting for the other foreclosure shoe to drop since late 2010, when questionable foreclosure practices slowed activity to a crawl in many areas, but that other shoe is, instead, being carefully lowered to the floor and, therefore, making little noise in the housing market – at least at a national level.”

Blomquist cautions that while the overall picture appears positive, hot spots of foreclosure activity continue to be of concern to economists. In September, Florida continued to have the highest rate of foreclosures in the nation – the state saw an increase in activity equivalent to a 24% increase over the same period in 2011. 

Analysts at RealtyTrac attribute this bloom in the Florida foreclosure rate, and similarly rising rates elsewhere in states including New York, New Jersey, Ohio and Illinois, to a stall in foreclosure activity during 2010-11 which itself is due to those states’ judicial requirements.States where foreclosures require a  judge to oversee the process (thereby slowing the process as it moves through the judiciary) are just now seeing the foreclosure tide’s crest. Says Blomquist: “[S]everal states where the foreclosure flow was not so dammed up last year could see a roller-coaster pattern in foreclosure activity going forward because of recent legislation or court rulings that substantively change the rules to properly foreclose. A backlog of delayed foreclosures will likely build up in those states as lenders adjust to the new rules..."

Formerly harder hit states like California, Michigan and Arizona do not require a judge’s review to initiate foreclosure proceedings; those are the states seeing a sharp decline in foreclosure filings.

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While the overall picture is mixed, there are glimmers of hope that certain markets are not just recovering, but beginning to thrive. Minneapolis-St.Paul may be one of them; Pioneer Press is reporting today on its TwinCities.com site that the average price of a home in a 13-county area that comprises the Twin Cities rose 12.3% to $174,000 in September compared against the same period last year, according to numbers released today by the Minneapolis Area Association of Realtors.

Perhaps it’s no fluke; the Associated Press is reporting that Kansas, whose housing market rebounded noticeably in 2012, just got the thumbs up for further growth in 2013 in a study prepared by Wichita State University researchers. Expected growth statewide is forecast to rise 6.3% citing an improving economy combined with pent-up demand.

And at the super-local level, mid-sized cities are reporting promising signs. Indiana Public Media reports today that the city of Kokomo, Indiana has seen a doubling of the number of new housing permits issued in just the first nine months of this year; to give an idea of the kind of rise that indicates, Kokomo issued six permits in all of 2011. Indiana Public Media interviewed a local builder on the result of the permit boom:

“Hallmark Homes Purchasing Manager John Breckenridge says the speed up in the housing market has allowed his firm to add workers. But despite the positive signs, Breckenridge says he’s still wary of the future.

‘It’s just depending on the combination of a lot of factors,’ Breckenridge says. ‘It’s continuing employment, the economy, banks, loaning of money to new home customers.’”

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The news today comes as the Remodeling Show and DeckExpo continue into a second day in Baltimore. To keep up with the goings-on, follow @QualifiedRemod on Twitter.

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