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Foreclosure Rates Dropping, but for How Long?

As the world's 11th largest economy, Texas was not immune from the recent recession and its effects on the housing market. As more homeowners lost their jobs or became overwhelmed with debt, they lost their ability to stay current on mortgage payments and other bills. The end result was an unprecedented number of homes lost to foreclosure. In May of this year, 1 in every 862 mortgages in Texas went into foreclosure.

Foreclosures remain a consistent problem for the housing market and economy as a whole. Homes in foreclosure usually sell under market price, drag down surrounding property values and are a time-consuming and expensive process for the lenders.

Recently, however, homeowners in the Dallas-Fort Worth area received some positive news. The number of homes in the DFW area facing foreclosure is 7 percent lower than it was in July 2009. Also, according to the Standard & Poor's/Case Shiller Home Price Index, the Dallas area has posted year over year gains in home prices for the past six consecutive months, leading many to believe that the market is rebounding.

Though the news indicates a positive trend, there is concern over how long this trend will last. RealtyTrac, a leading foreclosure listing service, warns that a new wave of foreclosures could hit in the second half of this year; and the same S&P/Case Shiller Index that notes year over year gains, also states that housing prices are 6 percent lower than they were in 2007.

Experts also warn that foreclosures are a lagging economic indicator, meaning that other areas of the economy, such as the unemployment rate, need to show some sustained improvement if foreclosures are likely to subside over the long term.

Additionally, economists at Goldman Sachs expect housing prices to fall by approximately 3 percent nationally over the next year, due in large part to the excess supply of new and existing homes for sale. Also, the federal home buyer's tax credit recently expired and experts believe this could result in fewer people buying homes later in the year.

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