Pretending Bay Area Foreclosures Are Shrinking

The number of new Bay Area foreclosure filings rose dramatically from June to July, but were below 2009 totals.  Foreclosure activity dropped because of government tinkering, not because the number of eventual foreclosures is getting smaller.

Illustrating yet again how data can be spun in different ways, The Contra Costa Times chose to spin a very positive headline.

The front page of yesterday’s Contra Costa Times boasted Feel-good foreclosure data in the East Bay

East Bay foreclosure activity decreased across the board in July compared with a year ago, a sign of improvement in the region’s real estate market.

Last month, the number of homeowners who received a notice of default — the first step in the foreclosure process — dropped sharply in Contra Costa County, while Alameda County saw a smaller decline, according to a report to be released today by RealtyTrac.com. Both counties also saw a decline in banks taking back properties, the last step in the foreclosure process.

“We are seeing a bit of a seesaw or roller coaster ride here with the numbers, and I think it’s because of all the outside intervention that’s impacting the foreclosure process,” said Daren Blomquist, marketing and communications manager for RealtyTrac. “Even though there are a lot of good signs, it’s really too early to say we are totally out of the woods in the foreclosure crisis.”

…

Year-over-year numbers provide a better gauge of the foreclosure environment than month-to-month numbers, said Karen Mayfield, senior vice president for San Francisco-based Bank of the West’s mortgage division.

“We’re seeing improvement,” she said.

Some 896 homeowners in Contra Costa County received a notice of default in July, a 53.8 percent drop from a year ago, and a 15.9 percent decline from June. Another 636 foreclosed homes in July became bank-owned, a 17 percent drop from a year ago, but a 10.4 percent gain form June.

In Alameda County, 1,790 homeowners received a default notice in July, an 8.3 percent drop from a year ago, but up 143.6 percent from June. Another 616 foreclosed homes became bank-owned, a 10.9 percent drop from a year ago, but a 60 percent increase from June.

In the Bay Area — which RealtyTrac.com defines a Alameda, Contra Costa, Marin, San Francisco and San Mateo counties — 3,149 homeowners received a default notice, down 35.1 percent from a year ago, but up 26.3 percent from June. Another 1,467 foreclosed homes became bank-owned, down 11.5 percent from a year ago, but up 18.8 percent form June.

So, the headline is debunked in just the third paragraph.

Consider as well the recent Times article that we discussed in Bay Area Mortgage Limbo

An estimated 40,283 homeowners across a seven-county region spanning the East Bay, South Bay and the San Francisco metro area were at least three months behind on their mortgages but not yet in foreclosure as of April, according to CoreLogic, which tracks mortgage performance data. That’s about 4.5 percent of total mortgages in those areas, and a drastic increase from 0.25 percent in January 2007. In the East Bay in early 2007, 1,435 loans were more than 90 days late but not in foreclosure. In April of this year there were 23,155. In the San Jose metro area, the total grew from 513 in January 2007 to 11,558 in April.

These are enormous numbers when you also consider that this only represents a small slice of would-be foreclosures. There are no doubt many tens of thousands more homeowers who have received a NOD but nothing else has happened.

Bottom Line: Don’t read too much into foreclosure data right now – the numbers are skewed by Government manipulation. There may come a time when foreclosures spike and shadow inventory begins to flood the market. Until then, these monthly figures don’t mean much.