The Housing Market: Is it or Is it Not Improving?

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Ever notice how some news stories that show up at the same time and on the same topic can present two entirely different stories? If you’ve paid attention to the housing market the past few days, there’s a good chance you found yourself wondering how the perspectives can differ so greatly. In fact, two stories showed up on the same national news site with two very distinct differences:

New foreclosures jump 9% in second quarter
and then…
700,000 homeowners no longer underwater on mortgages

Keep reading as we try to reconcile those two different messages.

The first half of 2012 saw more than one million foreclosures, default notices, auction announcements and bank repos. In fact, new statistics show there was a sharp increase in foreclosures during April, May and June. This is definitely worrying analysts as they were hoping for better numbers this week. Instead, the numbers rose to 9%. That’s 2% higher than the first quarter of 2012.

Even more worrisome is there were close to two dozen states that saw double-digit increases. For some states, including Indiana, Pennsylvania, South Carolina, Connecticut, Florida and Illinois, the increases were as much as 20% or more.

Part of the reason there’s such a distinctive rise is because of the mortgage settlement that a federal judge signed off on in April. Within days, banks began moving forward with all the foreclosures they had been forced to put on the back burner. Still, analysts say that doesn’t account for all of the increases.

Brand Moore, RealtyTrac CEO said,

The increases in foreclosure starts will likely translate into more short sales and bank repossessions in the second half of the year and into next year.

There might be a turning point, though. Because there are several relatively new government programs now in place, consumers have much more assistance when they need it. These agencies are serving as a mediator, of sorts, as homeowners try to prevent foreclosures.

So, then, if the foreclosures are ticking up again, why are there fewer homeowners upside down in their mortgages? Upside down is when a homeowner owes more on his home than its value. It could be that homeowners are taking advantage of those new government programs and as a result, the assistance and education they’re receiving is paying off. They’re beginning to see their houses as more of an asset again instead of a heavy burden. As they slowly climb out of the red and begin to realize they once again have equity in their homes, they’re far less likely to fall into foreclosure.

According to CoreLogic, the first quarter of 2012 saw 700,000 homeowners find themselves on the path back and were no longer in that vicious cycle. This is quite powerful considering a full quarter of homeowners were in that upside down state earlier this year. It’s now dropped to 23%.

This is a meaningful improvement that is driven by quickly improving outlooks in some of the hardest hit markets,

said Mark Fleming, CoreLogic’s chief economist.

It’s a promising outlook, but again, it’s all about perspective and even the most optimistic are not sure the economy won’t slow down these improving numbers, especially considering all of the recent reports on unemployment and consumer confidence. And, too, home prices continue to fall in some markets – and many markets have seen losses of more than one-third in terms of overall appraisal pricing. Phoenix is one city that’s really seeing its numbers improve.

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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