The Dark Cloud Behind the Silver Lining of Lower Foreclosure Activity

The video segment below from PBS NewsHour covering the RealtyTrac July foreclosure report does a decent job of covering the admittedly somewhat cloudy and divergent foreclosure trends revealed in the report.

Unfortunately those divergent trends indicate that the housing market is still struggling to extricate itself from the foreclosure albatross that has been weighing it down over the past five years.

The foreclosure trends diverge in at least two different ways: by state and by stage of the foreclosure process.  I covered the wildly divergent state foreclosure trends in more depth in a previous post, but suffice it to say that although national foreclosure trends are down for the 22nd straight month, foreclosure activity is spiking in a handful of bellwether states, including New Jersey, Indiana, Pennsylvania, Maryland and Florida.

And the increases in these states are not just one-month phenomena. Most of these states have seen at least three months of surging foreclosure activity and as many as many as seven months in Florida.

The foreclosure trends also diverge significantly by stage of the foreclosure process.  On the backend of the foreclosure process, bank repossessions continued to plummet in July, down 21 percent from a year ago. The July decrease was the 21st consecutive month where bank repossessions (REOs) decreased on a year-over-year basis.

Foreclosure Starts Surge
But the story is different on the frontend of the foreclosure process. Properties starting the foreclosure process in July increased 6 percent from a year ago. That may not seem too dramatic, but it marked the third consecutive month of year-over-year increases in foreclosure starts following 27 straight months of year-over-year declines in foreclosure starts.

Furthermore, the upward trend in foreclosure starts was more widespread across the states, with 27 posting year-over-year increases in foreclosure starts.

Iā€™d like to hear which of these divergent trends you think will win out this year. Will more states start posting increasing foreclosure activity? Will bank repossessions start increasing again as the foreclosure starts make their way through the process?

Related News
Four States, Four Different Foreclosure Patterns
Is The Foreclosure Crisis Ending?
Fed Still Attending to the Nationā€™s Housing Sector

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