The new numbers reported by Realty Trac place Arizona in the fourth position for highest foreclosure filings.  One in every 164 homeowners in Arizona received a foreclosure notice.  These new numbers may seem to be in contrast to my last blog, Phoenix Real Estate on the Upswing, so let me explain.  Last week's blog concerned the upswing in home sales, which still remains true.  Also my blog ended by letting you know that we were not out of the woods yet.  The economy and job loss will certainly take it's toll and contribute to the foreclosure market.
 
When talking about foreclosures and the resulting numbers, there are some factors to consider:

    *      Foreclosure filings can be misleading.  The numbers released today include Default Notices, Auction Sales and the number of homes lenders repossessed.

    *      Re-defaults.  There is no report that gives us the number of homes that have re-defaulted.  Unfortunately 60% of homes that recieve a notice of default and are able to stave off foreclosure for a period of time will go back in to the foreclosure process within one year.  This keeps the number of foreclosure filings miscued.

    *      Foreclosure filings are different than the actual number of homes which are repossessed by the lender.  Only 63,903 of the 342,038 foreclosure filings reported in Realty Trac's latest report were actually repossessed.  Only repossessed homes go on the market.
 
What the future holds in regards to foreclosure inventory is what will determine the recovery of the Phoenix Metropolitan Area's housing market.

    *      Loan modifications for distressed homeowners will help to reduce foreclosed inventory.  How many homeowners in the Valley of the Sun will actually be helped by loan modifications is unknown.  But, whatever the number, it will help to keep inventory down.

    *      Loan modifications keep the flood at bay.  On March 31, the moratorium on lender repossessions ended, but this helped to decrease the total number of homes coming on to the market.  The loan modification process is not a short one.  This will help delay foreclosed properties from coming on the market, which will help to keep the total number of housing inventory down.

    *      The Make Home Affordable program offers incentives to lenders to cooperate in loan modification.  Every loan modification that is granted will help to keep the number of foreclosed properties down.

    *      Sub-prime loan defaults are on the decrease.  Most sub-prime loans scheduled to adjust from fixed rates to adjustable rates were scheduled within 2 - 5 years from the time of purchase.  The bulk of readjustments have already occurred and the number of foreclosures due to sub-prime rates will steadily decrease,  However, foreclosures for these loans will continue through 2012.
 
Toxic loan filings are on the decrease and loan modifications will help not only to keep the number of foreclsoures down, but will also help to slow the number of foreclosed market coming on the market.  If we can absorb the inventory at a steady pace, the housing market will be able stem the downward spiral and then begin to stablize.

Larry Luenser, the smart choice for your Phoenix real estate needs