Home Foreclosures on Track to End 2013 at 6-Year Low

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Jae C. Hong/AP

LOS ANGELES -- The U.S. is on track to end the year with the fewest homes repossessed by lenders in six years, a trend that should help limit the negative impact foreclosures have on home values.

Lenders repossessed 36,964 U.S. homes last month, down 31 percent from July last year, foreclosure listing firm RealtyTrac said Thursday.

At the monthly average pace through July, completed foreclosures are projected to total nearly 490,000 this year, down roughly 27 percent from last year, the firm said. That's also the lowest since 2007, when 404,849 homes were taken back by banks.

Foreclosures peaked in 2010 at 1.05 million and have been declining ever since. The trend has been accelerating as U.S. home prices have increased amid a resurgent housing market, steady job gains and still-low mortgage interest rates.
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The foreclosure pipeline is also getting thinner on the front end.

Lenders initiated the foreclosure process on 60,601 homes in July, down 38 percent from a year earlier, RealtyTrac said.

Foreclosure starts and the number of homes repossessed by banks each increased 6 percent and 4 percent, respectively, from June. But annual increases, which are more telling of the long-term trend, occurred in less than half of the states.

"The most visible sign of distress in the market are foreclosures, and many of these markets have the foreclosure problem licked, for the most part," said Daren Blomquist, a vice president at RealtyTrac.

In a dozen states, including Texas, Colorado, Michigan and Indiana, foreclosure activity levels were at or below the average monthly levels last seen before the housing crash, Blomquist added.

"We expect the number of states in this category to increase in the coming months," he said.

Among the 15 states that posted sharp annual increases last month in foreclosure starts are:
  • Maryland -- 275%
  • Oregon -- 137%
  • New York -- 27%
Completed foreclosures rose on an annual basis in 18 states last month, including:
  • Arkansas -- 266%
  • Oklahoma -- 126%
  • New York -- 100%
  • Ohio -- 20%
Many homeowners in those states and elsewhere continue to owe more on their mortgages than their homes are worth, a scenario known as having negative equity. Homeowners with negative equity can be more vulnerable to foreclosure should they fall behind on their mortgage payments.

Some 9.7 million homes, or 19.8 percent of all U.S. homes with a mortgage, were in negative equity at the end of the first quarter, according to data provider CoreLogic. That's down from 10.5 million, or 21.7 percent of homes with a mortgage, at the end of last year.

In a healthy housing market, underwater mortgages historically account for about 5 percent of all homes with a mortgage.

Most of the homes in some stage of foreclosure as of July are tied to home loans that were made during the housing boom, before banks tightened their lending standards.

Of the 562,533 homes already on the foreclosure path, 71 percent have loans that were originated between 2004 and 2008, the firm said.

In Florida, nearly 80 percent of the homes in the foreclosure process have loans that date back to the housing bubble years. That's one reason the state registered the highest foreclosure rate of any state last month, or more than three times the national average, RealtyTrac said.

The state's foreclosure starts decreased 28 percent from a year earlier, but completed foreclosures jumped 13 percent.

Rounding out the top 10 states by foreclosure rate last month were Maryland, Ohio, Connecticut, New Mexico, Illinois, Nevada, Georgia, South Carolina and Utah.

9 Numbers That'll Tell You How the Economy's Really Doing
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Home Foreclosures on Track to End 2013 at 6-Year Low
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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