One of the recurring and lasting images of the Great Recession was that of a reporter walking through a nearly deserted development of newly built homes. It was shocking to see how quickly they began to deteriorate, empty cul de sacs, entire neighborhoods where only a handful of families remained. Many of these stories focused on Southern California, particularly the Inland Empire, one of the nation’s hardest hit areas. But much has changed since 2008 in the real estate market and most of that change has been for the better.
Take the latest report from CoreLogic (NYSE: CLGX), one of the leading global providers of real estate analytics and data. Their March 2016 National Foreclosure Report confirmed the ongoing trend of dropping foreclosure rates. Nationwide, foreclosure inventory declined by 23.2 percent, while completed foreclosures declined by 14.9 percent compared to where they were a year ago in March of 2015.
Those percentages represent 36,000 completed foreclosures by March’s end. Year over year that number is down from 42,000 in March of 2015. If you go further back to 2010 when foreclosures peaked post market crash, last month’s numbers represent nearly a 70 percent decrease in homes lost. In September of 2010 there were a staggering 117,782 homes that completed foreclosure.
What does CoreLogic mean exactly by “completed foreclosures”? First, they track the entire
“foreclosure inventory”, which represents the number of homes in any stage of the foreclosure process. Completed foreclosures are what they sound like, homes that have been officially lost to foreclosure, short sales and even some bank owned sales are not included.
In order to better understand how sharply completed foreclosures increased during the recession, we have to go back to the first quarter of 2004. That quarter represents the current peak in homeownership rates. From that time to September 2008 there were only 2.2 million foreclosures. But once the financial crisis began that fated September, there have been approximately 6.2 million homes lost to completed foreclosures.
As of March 2016 only 1.1 percent of all homes (427,000) were counted in the national foreclosure inventory. That’s a good deal less than the 556,000 homes, or 1.4 percent, from a year ago March 2015. In fact, the March 2016 foreclosure inventory rate is enjoying its lowest rate since pre-recession, nearly nine years ago, in October 2007.
That good news extended to another negative housing market indicator that CoreLogic tracks: mortgages in serious delinquency. A mortgage is defined as seriously delinquent if it is 90 days or more past due. This including loans in foreclosure or REO, but not completed foreclosures.
Those numbers declined by 19.1 percent from March 2015 to March 2016, with 1.2 million mortgages, or 3.1 percent, loans counted in this category. The March 2016 serious delinquency rate is the lowest in more than eight years, since November 2007.
“Nationally, the economy added 609,000 jobs during the first three months of 2016, and average weekly earnings grew 2 percent over the past year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Job and earnings growth have helped bring serious delinquency rates down in nearly every state. However, serious delinquency rates increased in North Dakota and West Virginia, two states affected by the drop in demand for the fuel each produces.”
“Delinquencies and foreclosure rates are now at pre-crash levels as the benefits of higher home prices, improving economic fundamentals and years of cautious underwriting are being felt across the country,” said Anand Nallathambi, president and CEO of CoreLogic. “Longer term, as loans made since 2009 account for a larger share of outstanding debt, we anticipate that the serious delinquency rate will have further substantive declines.”
Here are some other important highlights from the report:
- On a month-over-month basis, completed foreclosures increased by 9.3 percent to 36,000 in March 2016 from the 33,000 reported for February 2016.* As a basis of comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.
- On a month-over-month basis, the foreclosure inventory was down 2.2 percent in March 2016 compared with February 2016.
- The five states with the highest number of completed foreclosures for the 12 months ending in March 2016 were Florida (69,000), Michigan (48,000), Texas (28,000), Georgia (23,000) and California (23,000). These five states accounted for about 41 percent of all completed foreclosures nationally.
- Four states and the District of Columbia had the lowest number of completed foreclosures for the 12 months ending in March 2016: The District of Columbia (114), North Dakota (311), West Virginia (541), Wyoming (634) and Alaska (644).
- Four states and the District of Columbia had the highest foreclosure inventory as a percentage of all mortgaged homes in March 2016: New Jersey (4.0 percent), New York (3.3 percent), Hawaii (2.3 percent), the District of Columbia (2.2 percent) and Florida (2.1 percent).
- The five states with the lowest foreclosure inventory rate in March 2016 were Alaska (0.3 percent), Minnesota (0.4 percent), Arizona (0.4 percent), Colorado (0.4 percent) and Utah (0.4 percent).
There’s no doubt that the real estate market has recovered nicely from the mortgage lending crisis. And paying close attention to foreclosure rates is an excellent way to keep your finger on the market’s pulse. Thankfully, most experts predict that even red hot markets like the Bay Area, Denver and Los Angeles may see some cooling off in future months and years, but there is little risk of a bursting bubble.
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