Tuesday, August 14, 2012

Rip the Band-Aid?

For the market in homes to get going,
One should think of arresting the slowing
Of foreclosure delays
On homes that appraise
For less than the owners are owing.

Dr. Goose, who is no expert on America's housing malaise or real estate generally, recently checked into this topic to see what progress we are making at the halfway point in what appears to be a "lost decade". First the good news: according to MarketWatch, the level of foreclosure activity declined 3% in July (10% year-over-year), making the 22nd straight month that the numbers declined on an annual basis. However, the number of properties entering foreclosure rose 6% in July, the third such monthly increase in a row. 27 states registered y-o-y increases.

To a degree, it appears that the fall in overall foreclosure activity and the more recent rise in foreclosure starts relate to the same phenomenon: in states such as Florida, Illinois and my adopted state of New Jersey, foreclosure processing and procedural issues (or "levels of dysfunction," in the words of a RealtyTrac analyst) had slowed the pace of filings last year. The resulting bottleneck is evidently only now beginning to clear, resulting in the latest uptick in starts. By the same token, well-intentioned laws to aid distressed homeowners, such as that recently enacted in Oregon, may only delay the inevitable in many cases, thereby delaying as well the hoped-for clearing of the market.

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