Monday, January 17, 2011

Preview of 2010 year-end foreclosure totals

The statewide foreclosure report for the fourth quarter will be available in early February. Below are some estimates for 2010's year-end based on metropolitan foreclosure data.

Below are two graphs based on totals in foreclosure filings and foreclosure sales at auction in Colorado's metropolitan counties. These counties generally account for about 85 percent of all foreclosure activity in the state. This information can give us some insights into how the 2010 statewide year-end foreclosure totals will look.

In the chart below, we can see that in the monthly data, the total number of new foreclosure filings fell for the second month in a row in December. Compared to December 2009, December 2010's total was down about 21 percent. Foreclosure filings have been generally falling since the third quarter of 2009. The large number of foreclosure filings in 2009 that can be seen in the graph were likely driven by the large increases in job losses that began to occur in Colorado in late 2008 and through much of 2009.

Looking at the full year, 2010 foreclosure filings in metro counties were down about 11 percent compared to 2009.

Foreclosure sales rose from November 2010 to December 2010, but compared year-over-year, December sales were down about 19 percent. This decline was likely driven by the effects of the "slowdown" put in place in October by Bank of America and other servicers in response to the "robo-signing" controversy. Although the slowdown was phased out in early November, it appears that the processing of foreclosures has been slowly returning to former levels and that foreclosure sales totals did not bounce back quickly from the slowdown.

Looking at 2010 as a whole, however, the number of foreclosure sales at auction was up about 11 percent as the new foreclosure inventory (which was made considerably larger by the number of new filings in 2009) had to work its way through the system.

Nevertheless, if new filings continue to decline in a similar fashion as was the case during 2010, foreclosure sales will inevitably begin to decline as well.

Since the monthly foreclosure totals can be relatively volatile, I've smoothed out the totals by graphing a 6-month moving average of totals. As can be seen below, the number of filings clearly peaked in mid-2009 as job losses mounted, and foreclosure sales at auction then began to grow significantly about nine months later. The moving average in foreclosure sales has been declining since June 2010.