Foreclosure numbers are down 7 percent

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According to RealtyTrac, foreclosure filings in September are down 7% from August  - that’s 16% down from September 2011, and the lowest quarterly reading since the last quarter of 2007.

These numbers include default notices, scheduled auctions, and bank repossessions.

Activity slowed down quite a bit after banks put the brakes on foreclosures because of the robo-signing debacle two years ago. Everyone expected foreclosures to flood the market once banks were able to start processing their backlogs of delinquencies, but that’s not what’s happening.

Several factors contribute, mainly preventing homeowners from falling into foreclosure through efforts like the Home Affordable Modification Program and low mortgage rates.

Freddie Mac's REO inventory down

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Freddie Mac reported its REO inventory is down 30% from 2010 peak levels of 75,000 homes. At 53,000 units as of last quarter, the numbers reveal a reason to be more optimistic about the housing market.

Even though REO inventory has slowed since the ban on robo-signing went into effect in the fall of 2010, the economy is also seeing home prices on the rise and a lowering unemployment rate.

Freddie Mac also attributes its decline to the company’s focus on “early intervention” with distressed borrowers.

Existing home sales in August exceed expectations

The National Association of Realtors reported recently that the sales of existing homes rose nearly 8% in August (that’s 4.82 million homes), the highest level since May 2010.  This number exceeded economists’ expectations at 4.5 million. Foreclosures and short sales accounted for 22% of August sales, selling at a discount of 19% below market value for foreclosures, short sales at 13% below. The median home price in the Western United States rose to $242,000, up 16.3% from August 2011.

While some economists think the existing home sales numbers are not improving fast enough, economists in a survey expect housing prices to continually rise in the next four years.

Housing prices expected to rise in the next four years

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A survey conducted on behalf of Zillow in August and September has found that the majority of economists in the survey are increasingly optimistic that home prices will continue to rise steadily over the next four years.

From Realtor Magazine: “The economists surveyed expect home prices to rise 2.3 percent this year over the fourth-quarter of 2011, according to the survey conducted on behalf of Zillow. In 2013, they expect prices to rise 4.7 percent; 8 percent in 2014; 11.4 percent in 2015; and 15.2 percent in 2016.”

The survey also reveals that more than half favor the elimination of mortgage interest tax deduction.

The optimism is a very good sign that we’re on the road to recovery. Stan Humphries, Zillow's chief economist, says "It's refreshing to see this optimism at a time when the market seems to be making an organic recovery, in the absence of an artificial stimulant like the tax credits."

Underwater homeowners still have some refi options

CoreLogic has estimated that 1.8 million underwater homeowners own homes that are a mere 5% less than what they owe on their mortgage. And while home prices are rising, giving many US homes back some of their equity, there are still options for those struggle to get out of being underwater. Refinancing with today’s low interest rates (3.7% for 30 years) may not be a viable option, but two programs offered by lenders may help. Under the Home Affordable Refinance Program (HARP), it’s possible to refinance to a lower rate and payment, or a shorter term. Depending on your lender, you may not have to worry about an upper limit for the loan-to-value ratio. Be sure to check with your lender to see if you qualify. Fannie Mae borrowers can visit knowyouroptions.com/loanlookup, or visit freddiemac.com/mymortgage if Freddie Mac is your lender.

FHA mortgage borrowers have the option of reducing their monthly payment (must be by at least 5%) or switching to a fixed rate. To qualify, you must have had your loan for at least 210 days and made at least six payments.

Foreclosure sales in decline as servicers seek alternatives

According to a recent Core Logic report, the number of completed foreclosures saw declines in monthly and yearly sales. These numbers were down by 16% compared to a year ago, as servicers rely more on alternatives like short sales and loan modifications. The inventory of homes in the foreclosure process is also down to 3.2% from 3.5% one year ago. The decline in completed foreclosure and in foreclosure inventory is a sign that the housing market is closer to stabilizing. The Los Angeles/Long Beach/Glendale areas accounted for 19,599 foreclosed homes over a one year period.

Percentage of distressed sales in June are lowest since June 2008

According to Radar Logic’s monthly housing market report, June sales of homes at foreclosure auctions and REO sales fell to its lowest level since 2008. The statistics are derived from 25 metropolitan cities throughout the country. The report also showed concerns over a large backlog of inventory including bank inventory, underwater homes, and homes in the process of foreclosure.