Foreclosures slow in the hardest-hit states, but jump in several others

The number of foreclosures remain high in the four states that top the list -- Nevada, California, Florida and Arizona -- but the trend appears to be moving in their favor. All four saw declines in their foreclosure filings from September to October, according to RealtyTrac's October 2009 U.S. Foreclosure Market Report. Arizona, Florida and Nevada even saw fewer foreclosure filings year-over-year compared to October 2008.

Nationwide for the third consecutive month, foreclosure filings dropped. These filings, which include default notices, scheduled foreclosure auctions and bank repossessions, totaled 332,292 in October 2009, a decrease of 3% from September. That does represent an increase of 19% from October 2008, but foreclosure moratoriums were starting at that time and continued to build through the end of the year. So, year-over-year comparisons may make things look worse than they are through the end of 2009.

"Three consecutive monthly declines is unprecedented for our report, and on first blush an indication that the foreclosure tide may be turning," James J. Saccacio, chief executive officer of RealtyTrac, said in a statement released with the report. "However, the fundamental forces driving foreclosure activity in this housing downturn -- high-risk mortgages, negative equity, and unemployment -- continue to loom over any nascent recovery. And despite all the efforts and resources directed at helping homeowners avoid foreclosure, we continue to see foreclosure activity levels that are substantially higher than a year ago in most states."

Arizona saw the biggest drop, with 10.6% fewer foreclosures in October than September. The state's total foreclosure filings in October were 13,345, or one in every 200 units. Its year-over-year decline was 23.77%. Nevada saw a huge drop from October to September of 26.24%, but its year-over-decline was just 4.43%. Total Nevada flings were 13,842, or one in every 80 units. Florida saw filings drop 5.68% from September to October and down 4.44% year-over-year, but it still showed 51,911 filings, or one in every 168 units.

Of the four hardest-hit states California had the lowest drop -- just 1.06% from September to October. Year-over-year filings went up 49.98%. California maintained it's top spot in number of filings with 85,420, which represents one in every 156 units.

Where the Big Jumps Were

Illinois, which posted the third-highest state total after California and Florida, with 19,946 properties getting foreclosure notices, also saw a huge spike of 56.18% in foreclosure filings from September to October. This was the highest monthly total for Illinois since RealtyTrac started issuing this report in January 2005. Illinois is the only state in the top 10 that posted a monthly increase in foreclosure filings.

Other states that posted a major monthly jump in filings included Alaska (up 35.11% on a monthly basis and 17.83% year-over-year), Delaware (up 106.10% in October and 112.08% year-over-year), New Mexico (up 55.89% in October, but it's year-over-year percentage of 371.21% is likely overstated because of a change in how foreclosures were calculated), and North Dakota (up 73.53% in October and 40.48% year-over-year).

These numbers show that the hardest-hit states, while still reporting high numbers of foreclosures, are at least seeing them drop. Other states, however, are experiencing significant increases from previous months. The good news is that 33 states saw fewer foreclosures filings from September to October, while 17 states had an increase. Year-over-year, the news isn't as good. Only 15 states recorded a decrease in filings year-over-year, while 35 had an increase.

Four states still accounted for a majority of foreclosure filings in October: California, Florida, Illinois and Michigan together accounted for 52% of the nation's total foreclosure activity. Other states in the top 10 included Nevada, Arizona, Georgia, Texas, Ohio and New Jersey.

The housing market certainly isn't out of the woods, but at least the current trends appear to be improving. But the big question is: Will foreclosures start creeping up again as unemployment remains high and so-called Alt A loans (those that required less documentation from borrowers) begin to change rates in 2010? So, it's certainly not time to celebrate the end of the housing crisis. With the passage of an expanded tax credit for buying homes, more people who have been on the sidelines may decide it's time to step up.

Lita Epstein has written more than 25 books including The 250 Questions Everyone Should Ask About Buying Foreclosures.

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