CHICAGO—After years of waiting, a true economic recovery, which had always seemed just around the corner, now seems at least plausible. One of the recent statistics that grabbed a lot of attention was the decline in foreclosures. According to the October 2013 National Foreclosure Report by CoreLogic, a property information provider, the number of homes in some stage of foreclosure was about 879,000, or roughly 2.2% of homes with a mortgage, a decline of about 388,000 from the previous October when 3.1% of homes were in foreclosure.
“The scourge of an elevated foreclosure inventory is easing,” says Anand Nallathambi, president and CEO of CoreLogic. “Additionally, the rate of serious delinquencies, which fell more than 25% year over year, is at the lowest level in nearly five years, which is great news as we head into a new year.”
Still, amidst all the talk of an economic recovery, some voices of caution remain. “This is the slowest recovery out of a financial crisis that we've ever had,” says Scott Shellady, senior vice president of derivatives for Trean Group, a futures and commodities brokerage in Chicago. More than five years after the onset of the crisis, he adds, “we can still only manage a 1.5% growth rate.”
And that will mean a long, hard slog uphill. One thing the economy does have going for it is the Federal Reserve's loose money policy, but Shellady believes this response, in addition to boosting some real estate, only benefits the very small minority of Americans who own significant amounts of stock. “These things have outpaced everything else,” but “generally speaking, there is a large swath of Americans that does not benefit.”
“We're seeing a decline in foreclosure rates, and that's a sign the market is healing,” but “we look at all types of inputs across the economy,” and a lot of what they see is troublesome. Long-term unemployment is still at a historic high, and banks have not restarted lending, at least at the level seen in the years prior to the shock of 2008.
“It really isn't in their best interest to [lend money] out,” and therefore, economic activity could remain relatively muted for some time.
The seasonally adjusted annual rate of new privately-owned housing units authorized by building permits has increased from 513,000 in March 2009, the bottom of the market, to a little more than 1 million in October, according to US Census estimates. But in September 2005, that number had hit more than 2.2 million.
“A lot of people look at one number and then say we're on the mend, but I beg to differ. It's good that foreclosures are going down, but it's still going to be a very long, slow recovery. At some point we'll turn it around, but I don't see it in the next 24 months.”
CoreLogic experts agree with Shellady's caution. Dr. Mark Fleming, for example, the provider's chief economist, says the decline in foreclosures is “good news for the housing and mortgage finance markets, but the rate remains elevated relative to the pre-crisis level of about 0.6 percent. There are almost 900,000 properties still in foreclosure, but a normal level would be only a quarter of the current stock.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
