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Drop in foreclosures doesn't indicate better economy

Posted July 14, 2011

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— Banks foreclosed on fewer homes in North Carolina and the nation during the first half of 2011, compared with a year earlier, but that's not a sign of an improving economy or personal finances, experts warn.

Instead, new regulations and paperwork delays are the major reasons behind the drop in foreclosures.

Nationally, banks seized 421,212 homes in the first six months of the year, down 20 percent from 529,633 between January and June of last year, foreclosure listing firm RealtyTrac Inc. said Thursday. Foreclosures in North Carolina fell about 24 percent.

"Banks have been taking longer to foreclose because of lawsuits, because of new regulations," North Carolina State University economist Mike Walden said. "I don't think we can look at these numbers as a good sign right now for the housing market."

Lenders are taking longer to move against homeowners behind on their mortgage payments or have simply put off taking action as U.S. home sales slowed this year. Banks are also working through foreclosure documentation problems that first surfaced last fall and created a logjam in some state courts.

Those delays will push more than 1 million foreclosures from this year into 2012, and that could delay a turnaround in the housing market to as late as 2016, said Rick Sharga, a senior vice president at RealtyTrac.

Foreclosure drop doesn't indicate better economy Foreclosure drop doesn't indicate better economy

"It could be the new reality is we're going to have to accept the fact that home prices in most markets aren't going to budge much for the next several years while this overhang gradually, painfully makes its way into the market and gets purchased," he said.

Foreclosures typically bring down the value of neighboring houses and sell at low prices, decreasing home values. The average home has already lost 30 percent of its value since the start of the recession, Walden said.

As well, many people who could afford to buy homes are waiting for prices to dip lower.

An uncertain housing market also creates doubts for the U.S. economy, in which the housing market has has typically shown the first signs of recovery from past recessions, Walden said.

"I don't know if that will be a big enough blow to send us back into a recession, but clearly, it will probably be a psychological blow to people in the housing market," he said.

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  • flashsparks Jul 15, 2011

    "Tonight, more Americans are out of work and more are working harder for less. More of you have lost your homes and even more are watching your home values plummet." --- Obama acceptance speech, from August 2008.

    Millions more have lost their jobs and are out-of-work since Obama said this BECAUSE of Obama's reckless spending. The only way out of this mess is to elect a fiscal moderate-to-conservative president who knows how to negotiate instead of storming out of a conference room spouting "enough is enough" like a five year old.

  • storchheim Jul 15, 2011

    He's trying to ruin Americans who live responsibly and pay their bills, which includes mortgages.

    I guess that babbling, shrieking woman who was rejoicing about "Obama's gon' pay my mortgage and put gas in my car!" had it right. We didn't realize it was only for types like her, though.

  • HBdirtbag Jul 15, 2011

    I know of multiple homes that haven't had a mortgage paid in well over 18 months and the banks still haven't booted them as well. There are A LOT more foreclosures that will happen over the next two years

  • Follow_The_Money27617 Jul 15, 2011

    Home prices are back where they should be. Its not my fault you bought an overpriced house.

  • Nancy Jul 15, 2011

    "can we say he is trying to help Americans? why else would he do it? he isn't a republican..."

    Has all his spending helped anyone long term so far? No, just increased our debt a trillion a year so far.

    Temporary spending with money we don't have is helping no one, individual or country.

  • regretpostinganythingonwral3 Jul 14, 2011

    can we say he is trying to help Americans? why else would he do it? he isn't a republican...

  • Rolling Along Jul 14, 2011

    We ain't hit bottom...yet!

    I purchase "distressed" real estate, banks don't want to deal at this point.

    FWIW your evaluation may go down, but many areas are raising tax rates to compensate.

  • Nancy Jul 14, 2011

    And the President just approved a 1 BILLION dollar program to give money to those close to foreclosure that will keep them afloat for 48 months.

    Can we say this will just elongate the foreclosure mess? I'm afraid so.

  • dae66 Jul 14, 2011

    That is because banks are sitting on these houses and not foreclosing! I know of two houses that are vacant for over a year but the banks have not even begun foreclosure. I'd be interested to know how many of these houses there are! Then run the numbers.

  • mep Jul 14, 2011

    The longer banks hold onto "toxic" homes that need to be foreclosed on... the longer it will take for the housing market to recover.... and home prices will stabilize... at a lower level for sure.

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