Foreclosureradar.com has released the November foreclosure report reflecting figures for October 2009 indicating foreclosure figures befitting of a Halloween fright-fest.  More suspenseful than blood and guts, scheduled foreclosures (up 131.36 percent from the peak July 2008) continue to grow as homeowners and their banks wonder how this mess will ultimately be sorted out.

October marks the first month in the past four where actual foreclosure sales, which send properties back to banks as REO, have increased.  Yet the 22.24 percent increase from September 2009 and 20.95 percent increase from October 2008 are still 42.56 percent below peak levels (July 08).  The report suggests a “foreclosure limbo” where some homeowners hope for loan modifications, some pursue short sales, while others simply wait for that knock on the door letting them know it’s time to leave.

These extended foreclosure periods may also have another effect on the overall economy, a Stealth Stimulus if you will.  As homeowners await their fate, not paying the mortgage or rent, some families are finding the discretionary income for additional consumer purchases.  Consumer electronics, dining out, a night at the movies and deluxe cable packages are just a few of the consumer items for which defaulted homeowners are now finding the discretionary funds.

You may read the full California Foreclosure Report, or scan the highlights below:

  • NOD’s – an 7.47 percent decrease from September to October.  35,323 total filings, which is an 103.46 percent increase over October 2008
  • Trustee Sales – a 13.02 percent increase from September to October.  37,421 total filings, which represents a 41.74 percent increase over October 2008. Indicating the impact of SB 1137, passed in September 2008
  • Auction Sales Back to REO – a 22.24 percent increase from September to October. 16,081 total sales.  A 20.95 percent increase year over year.
  • Cancellations - an increase of .94 percent totaling 8,741 previously scheduled sales.  This represents a 22.52 percent decrease from October 2008.
  • Third Party Sales - properties sold to investors at the court steps increased 16.42 percent in October 2009.  A total of 3,971 properties sold to investors or junior lien holders.  Still a small percentage of total sales, third party sales continue to increase as does competition forcing discounts lower.

What’s been lacking since the bubble burst was an efficient flow of information and a delivery system to decisively move distressed inventories through the market and back to retail buyers at corrected prices.   Internet technology, electronic trading platforms, independent information sources like blogging sites, social networking like twitter, and business networking sites like Linkedin, will be key elements in resolving this issue.

As information expeditiously moves through the real estate community, most parties involved in this downturn can rely on quicker access to information, easier deployment of resources, and more on the spot awareness of conditions.  Homeowners, for the most part, know how long they can wait and when they can increase consumer spending.  Tenants realize when they can stop paying and what they can get for leaving after foreclosure.  Investors can more readily spot inefficiencies, gain access to capital, and share insight and investment strategies.

What’s left is the banking system.  A bloated, slow moving industry weighted down by regulation, outmoded systems, and overwhelming financial constraints, the industry stalwarts seem to large to change course.  The saving grace is that banks are driven by the financial bottom line.  Although heartless, it remains essential that banks pursue their course of action with a pure capitalistic mindset.  We may all want help with our defaulted loans, but we also firmly grasp onto the security of our bank deposits.  The banks are the last piece of this puzzle, when they get on board we we begin to see our path out of this mess.