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Foreclosure Sales Provide Insight Into Housing Recovery

Joe Manausa, MBA
1 min read

I try to keep track of as many possible statistics about the housing market, knowing that a gem of intelligence is always lurking behind some chart or graph if I look hard enough. One graph that historically has been un-revealing is suddenly speaking to me in volumes.

The graph below shows the continuing trend of banks pushing through to a final foreclosure sale in Tallahassee. In the past, roughly 10 to 15% of lis pendens that were filed on a property resulted in a foreclosure sale, and there was rarely any movement or trend in that area. The data made for a boring graph. Until now.

Distressed Properties In Tallahassee Image

Tallahassee has been a fairly stable market for many years. Prior to the housing boom 7 years ago, distressed properties were a tiny niche in the market, with only a handful selling every month. When homeowners got into trouble, they usually  were able to find an alternate solution to foreclosure, such as getting current on the loan, selling the home through normal market conditions, selling short, or surrendering the property to the bank in what is referred to as “deed in lieu of foreclosure.”

But times have changed. The blue line on the graph below shows that the ratio of foreclosure sales to lis pendens filings is about to reach 60%, though part of the high percentage is “a math thing,” because the denominator is dropping fast while the numerator is rising.

Regardless, more lis pendens filings are ending up as foreclosure sales today than ever before.

The trend of new filings continues to drop (green bars) and the trend of foreclosure sales has actually started to drop as well, though foreclosure sales (red bars) were halted by the courts (and some poor decision making by the banks) and I suspect we will see the foreclosure sales begin to rise again before the end of the summer.

2011 is the Year of the Foreclosure, and if we see a spike in sales activity, we might be able to consider this the worst year as we head into a full market recovery. The biggest variable will be the speed in which lenders are able to ramp-up the processing of stalled files.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.