Foreclosures may have had a rare down month in October, but don’t expect it to last. Interest struck a new low, while mortgage activity is up. We’ll round out the week with 2010 expectations on home-building and guidance for the next two years. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free RealtyTrac: Robo-Signing Mess Stalls Foreclosures in October Releasing its October Foreclosure Market Report, RealtyTrac reported a 4% decline in foreclosures over September. The number of foreclosure filings, default notices, and schedule auctions was 332,172 for October. The US has seen 20 consecutive months of over 300,000 foreclosure filings. Despite the decline, some states saw an increase in foreclosure filings, most notably, Florida, Ohio, and Illinois. Nevada, Florida, and Arizona continue to post the highest foreclosure rates. California alone accounted for 20% of the nation’s total. The important note here is that RealtyTrac’s CEO James J. Saccacio believes the decline is directly related to the robo-signing controversy. Many banks halted foreclosures temporarily while others slowed to review their internal processes. It’s critical we get the documentation issues behind us as inventories need to flow through the system in order to move us past the housing crisis. Rates Hit New Low After QE2 Announcement Reacting to the Fed’s QE2 announcement, interest rates responded by setting new lows. The 30-year fixed rate dropped to 4.17, down from 4.24% last week. The 15-year fixed rate also set a new low at 3.57% down from 3.63% the previous week. The 30-year is down significantly from last year’s 4.91%. This new low should cause a boost in refinance activity and even some purchases as consumers make year end moves. This year end spike could lead us to some decent home sales numbers at a time the worst in housing price declines are yet to come. The Fed’s QE2 shouldn’t cause rates to fall much further, but we are close to testing 4%. If rates fall below 4% that could create a large burst in purchase activity. Boost in Confidence Yields Mortgage Activity Both refinances and purchases got a boost as better than expected employment reports triggered new activity in the mortgage markets. The Mortgage Bankers Association reported a 5.8% increase in its Market Composite Index, week ending November 5th. Lead by refinances (up 6%) and followed by a increase in purchases (5.5%). Important to note as well is that purchases are just 14% below where they were a year ago. I was pleased to see the bump in mortgages over the week. This reinforces that people are looking for signs to expend pent up demand. The better than expected October employment report was a good sign for the economy. I’m expecting we’ll see stronger retail numbers than last year over Q4. This could produce enough activity to get mortgage activity more in line with last year. Lastly, I’m expecting another refinance surge with this weeks record low mortgage rates. Home-Building Industry Offers Guidance The National Association of Home-Builders (NAHB) lowered its year end projections for single-family homes in 2010 from 552,000 to 479,000. Further, they project single-family starts to jump nearly 40% to 655,000 in 2011 followed by 1mm starts in 2012. NAHB’s chief economist David Crowe thought the pent-up demand would lead to better numbers. Unfortunately due to continued negativity on employment people remained on the sidelines. An increase of 40% next year will solidify any doubts a recovery in new-home construction is in effect. The 1mm projected starts in 2012 is a big improvement. Demand from population growth alone dictates around 1.6mm homes need to be built annually. This is good for the market as absorption in 2012 is still going to play a huge roll in home prices. Heading into the Holidays While home prices sputter and head down another leg, new incentives are popping up for people to spur housing. The October employment report created activity in the mortgage markets, the Fed has stepped in with QE2, and interest rates hit new lows. It appears the US has turned the corner as a country. People are reacting to a new congress and improved market conditions. I feel strongly that the housing recovery will be lead by people, not governments, nor lobbyists, nor corporations. When people feel better about the economy they spend, move, travel, and grow their families. This holiday season, I believe we’ll see much improved retail numbers showing people are feeling better. With rates nearly 4% on the 30-year fixed, it starts becoming an incredible opportunity for many to buy a bigger house, refinance, or remodel. We’re still treading on thin ice as plenty of obstacles are in front of us. A foreign debt crisis could easily derail the recovering banking sector penalizing the housing recovery. I think Americans are paying close attention to even the smallest announcements about the economy. If bits of improvement keep coming in, the recovery may happen faster than we expect.