Economy Watch: High, Steady Foreclosure Rate the New Normal

One in every 381 U.S. housing units received a foreclosure filing during the month of August.

September 17, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user chrisdlugosz

RealtyTrac, whose specialty is the joyless world of residential mortgage foreclosures, reported on Thursday that United States foreclosure filings—default notices, scheduled auctions and bank repossessions—occurred on 338,836 properties in August, a 4 percent increase from the previous month but a 5 percent decrease compared with August 2009. One in every 381 U.S. housing units received a foreclosure filing during the month.

The company posits that the misery of foreclosure is evolving into a more managed affair, at least compared with the early days of the recession, when foreclosures charged ahead like the bulls at Pamplona. “The trend lines of decreasing default notices and increasing bank repossessions converged in August, with virtually the same number of new default notices and bank repossessions for the month—a clear indication that the clogged foreclosure pipeline is being carefully managed on both ends by lenders and servicers,” said James J. Saccacio, RealtyTrac CEO, in a statement.

As owners of large numbers of REO properties, it’s in banks’ interest not to dump too many properties too quickly in any particular market, especially since most housing markets are fragile enough as it is. And as usual, some markets are worse shape that others: Nevada had the nation’s highest foreclosure rate again, for the 44th month in row, even though its year-over-year rate in August was down 25 percent. Florida, Arizona and California are still top foreclosure states, and surprisingly in August, Idaho joined the top five, with a foreclosure spike between July and August of 9 percent.

Americans Less Enthusiastic About Homeownership: Fannie Mae

Fannie Mae’s latest national housing survey was also released on Thursday, finding that most Americans think that the housing market has finally hit bottom. How long the market will scrape along the bottom is another matter. Nearly half (47 percent) of the respondents thought that home prices will remain steady in the next year, and 31 percent believe they will increase.

“Although most Americans believe that home prices have bottomed, they are adopting a much more cautious approach toward buying,” Doug Duncan, Fannie Mae’s chief economist, said in a statement. “Homeowners and renters alike continue to be wary of taking on risk, and they are less confident in the long-term outlook for housing.”

But not completely sour on the idea of homeownership. A majority of Americans (67 percent) still believe that housing is a safe investment, though that number is down 16 percentage points from a similar survey conducted in 2003, which is the largest drop by far among all investment types tracked since then. More than 70 percent of all respondents believe that it will be harder for the next generation to buy a home, up three points from the beginning of the year.

COP Knocks Dying TARP

The Congressional Oversight Panel said in its September report that the $700 billion Troubled Asset Relief Program, which is slated to expire in early October, was essentially bungled, at least in terms of public perception. “The early change in TARP strategy from asset purchases to capital injections, followed by the rollout of numerous seemingly unconnected programs, combined with largely ineffective communication of the reasoning behind these actions, spread confusion in the public and undermined trust in the TARP,” the report asserted.

Perhaps more importantly, the perception of TARP mismanagement might mean that, “unless the program’s effectiveness can be convincingly demonstrated, the government will not authorize similar policy responses in the future.”

Then again, COP might be overestimating the public’s ability to remember anything about policy responses. According to a Pew Research survey this summer, only 34 percent of respondents correctly said that TARP was signed by President Bush, as opposed to 47 percent who thought incorrectly that President Obama signed it.

Wall Street had a mixed day, though slightly up for the most part. The Dow Jones Industrial Average ended up 22.1 points, or 0.21 percent, while the S&P 500 lost a minuscule 0.04 percent and the Nasdaq gained a tiny 0.08 percent.