The real estate market has gained some air after the housing bubble burst, but the effects leave many states oxygen deprived.
The past two years have seen the most recovery with United States housing prices back to pre-burst times and foreclosures have descended.
Core Logic, a global property data firm, released figures about national real estate in the foreclosure process stating less than 650,000 are in some stage of the procedures versus one million homes just one year ago. That is a 35% decrease in foreclosure inventory.
Positive news is encouraging yet the foreclosure rate remains high in several states. According to CoreLogic, the U.S. states that account for approximately half of all foreclosures for the past year are Florida, Michigan, Texas, California, and Georgia. To slow the process down further many hard hit foreclosure states like Florida, New York, and New Jersey have laws requiring court approval before mortgage lenders can proceed with foreclosure procedures.
Jurisdiction laws are in place to protect homeowners who may have had their home taken away unjustifiably but are also slowing down the process to get those homes back on the market. There is concern over whether or not the current recovery pace can be maintained with the complexities surrounding the foreclosure market in judicial foreclosure states.
Banks are also feeling the pressure of the large foreclosure caseload. Many have neglected to keep proper real estate closing documentation. Thus, numerous homes in the proceedings remain stagnant because Banks often decide against repossession without informing homeowners of their decision. Homeowners, frequently desert their homes under the assumption they are no longer have the right to ownership and possession of their home. The home becomes what is called a zombie foreclosure, where the mortgage lender or Bank initiates foreclosure proceedings and then dismisses the foreclosure without notice.
It is estimated by the real estate data firm, Realtytrac that 21% of all homes in the foreclosure process are now zombie foreclosures. The timeline to complete court proceedings or process these properties back to the homeowners is unforeseeable.
There is more complication with the value of many homes being much lower than homeowner mortgage debt. Core Logic estimates 6.3 million or 12.7% of U.S. homes are valued at a price much lower than the credit advanced to homeowners. The new laws and regulations established by the banking system due to the bubble burst amongst many other factors have indicated it is highly unlikely for homes to reach the price gains as experienced prior to the climax of the real estate market. Consequently, a slow recovery is in the future of zombie foreclosures, values lower than mortgage debt, and the broader U.S. economy.
The real estate market has seen progress in the recent two years yet the housing bubble leftovers may linger for a while to come.