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Bad news on foreclosures catching up to New Jersey
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Foreclosure filings kept surging in Atlantic and Cape May counties in August, even as they fell slightly nationwide.
But RealtyTrac, the California-based publisher of foreclosure information, said the increase locally and throughout New Jersey reflects the state courts catching up with a long backlog of filings.
And as they catch up, county rates will seem to rise and New Jersey probably will join the worst states in the nation for distressed properties. In August, it had the 11th highest rate of foreclosures in the U.S.
Atlantic County foreclosures increased 26 percent in August after jumping 36 percent in July, while Cape May County saw increases of 25 percent in August and 34 percent in July.
Filings in New Jersey rose 29 percent from July to August after soaring 49 percent the month before.
"Part of the reason for New Jersey's increase over the last two months is that the volume of foreclosure activity was so high over the last year or so that the Superior Court got behind in processing the paperwork," Daren Blomquist, spokesman for RealtyTrac, said Wednesday. "Now they're catching up with activity that under normal conditions would have shown up in previous months."
In mid-August, state court officials acknowledged that the paperwork delays had made it look like New Jersey foreclosures declined in the first half of the year. After surveying the filings backlog, they said foreclosures actually increased 30 percent during that time.
Blomquist said county foreclosure increases were influenced by the working off of the backlog, with the exception of two rural counties - Cumberland and Salem - where he suspects paperwork was more current. Cumberland County foreclosures fell 4 percent in August, while they plunged 40 percent in Salem County.
In other states such as Nevada, California and Arizona, filings are more efficient because banks don't need to go through the courts, he said. As New Jersey catches up with its filings, it likely will get nearer to the nation-leading foreclosure rates in those states.
"It's hard to get a bead on the true trend," Blomquist said. "Earlier this year, when New Jersey was ranking in the middle of the pack, that was a lower rate than it should have been. Now the rate will be higher than it should be."
Even though foreclosures declined 0.5 percent nationwide in August from the previous month, they were at a record high in July. And judging from RealtyTrac's talks with people in the market, he said, "It's certainly not the beginning of a downward trend yet."
One trend in the August numbers suggests foreclosure rates could get worse.
Properties in the final steps of foreclosure were significantly lower nationwide, Blomquist said, while there was an increase in those in the initial stages.
"That could mean that loan modifications are having an impact and stopping people from losing their homes," he said.
But it also means more properties are going into the pipeline, driven by problem loans, lost jobs and falling home prices - even though there have been signs the recession is ending this summer and the economy is tentatively improving.
"It's not surprising there are good signs in the real estate market even while foreclosures are continuing to go up while we work through the problems of several months ago," Blomquist said. "Foreclosures are typically a lagging indicator. The ones we're seeing now were from problems three to six months ago."
New Jersey's slower paperwork will increase the lag. What will look like the state's darkest hour for foreclosures may actually be well past the real estate market's dawn.
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Posted in Business on Thursday, September 10, 2009 3:05 am
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