Housing Recovery Lags in Judicial Foreclosure States

Kiplinger

By Karen Mracek

Believe it or not: The housing market is recovering in most states. Home price indexes for 38 states ended 2011 above their early-year lows. And while prices aren't yet up to prerecession levels, 30 states had more than two quarters of growth under their belts by the end of 2011, according to data from the Federal Housing Finance Agency.

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But the national index is still falling, dragged down by pricing drops in the worst-hit states. It'll drop another 2 percent in the next six months before starting to climb in the second half of the year. There are just a handful of states dragging down the national average: Arizona, California, Florida, Michigan and Nevada, all of which saw home prices drop by more than 50 percent from 2006 levels. These five states are home to 46 percent of the inventory working through the foreclosure process.