Foreclosure Rates and the Foreclosure Market: Down or Up?

Foreclosure rates are one factor among many in a housing market that seems to be pulling in every direction at once. Last quarter observed a decrease in the number of foreclosures of homes in the state of Texas. The Texas market, affected less by the housing bubble and bolstered by the region's relatively low unemployment rate, looks to be coming out stronger than markets in other areas.

On the other hand, delinquency rates remain high, even in Texas. One in every ten Texan homeowners is behind in their payments, and the rate of homeowners who are "seriously behind" (90 days or more) is 6.14%. Both rates trail the national average, which has fallen during the last few months of 2009 according to the seasonally-adjusted delinquency rates. The overall high rate of delinquency is still likely to lead to an increase of the foreclosure rate. Experts are predicting 3 million foreclosures this year, up from 2.82 million last year.

However, there is some good news. The Obama administration has extended the deadline for their refinancing program, known as the Home Affordable Refinance Program. Originally scheduled to run out by June 10, 2010, it will now expire on June 30, 2011, to help more homeowners make their payments. In addition, not all delinquencies—or even foreclosure filings, which are also up over the last year—lead to foreclosures.

Overall, signs in the Dallas-Fort Worth area are positive. According to a Federal Housing Finance agency report, Dallas was one of three of the Top 10 cities that showed housing price gains. And the overall foreclosure rate in Texas is only 2%, less than half of the national average. 

In addition, while foreclosures tend to sell for lower prices than non-foreclosed homes (or equity sales), the low number of equity offerings lets them compete with foreclosures, especially given the difficulty for the average buyer of seizing a particular foreclosed home. This means that the increase of foreclosures may not offset other factors in the housing market, such as low-but-rising mortgage rates and improving unemployment.