While foreclosure activity in the first quarter of 2008 was up on a year-over-year basis in 90 percent of the nation's 100 largest metropolitan areas, according to the RealtyTrac Q1 report issued today, there were a few notable exceptions that could prove to be a harbinger of hope for the nation's battered housing market. On the other hand, those exceptions could just turn out to be a source of false hope, perpetuated in part by short-term foreclosure solutions that are about as effective as a five-gallon bailing bucket on the sinking Titanic.

The notable exceptions included Detroit — a longtime posterchild for the foreclosure meltdown — and Philadelphia, along with a few other Pennsylvania metro areas. Foreclosure activity in Detroit was down nearly 4 percent from the first quarter of 2007, although the city's foreclosure rate still ranked No. 6 among the nation's 100 largest metropolitan areas. Philadelphia's foreclosure rate ranked No. 82, thanks in part to a 30 percent year-over-year decrease in foreclosure activity.

Dispatches from Detroit indicate that free-market forces may be the catalyst. The Detroit Free Press reported that "Detroit home sales shot up 30.8% in March, spurred by investors taking advantage of low prices on foreclosed properties." Detroit home prices have hit a low enough threshold to become appealing to bargain buyers and investors. That in turn allows lenders to start unloading foreclosure inventory, easing a heavy burden that has been weighing down the city's housing market.

Different forces may be at work in Philadelphia, helping that city's foreclosure rate remain relatively low. A moratorium on all foreclosure sales scheduled in April there has now been replaced by a pilot program that delays foreclosure proceedings on owner-occupied properties until the homeowner and lender meet in a "conciliation conference," according to the Philadelphia Business Journal. Foreclosure sales originally scheduled for April and May will be postponed until at least July.

Meanwhile, foreclosure activity continues to increase at a torrid pace in many of the now-familiar foreclosure hot spots: up 291 percent annually in Stockton, Calif., which posted the highest foreclosure rate among the 100 largest metro areas; up 134 percent in Las Vegas, No. 3 on the list; up 294 percent in Phoenix; and up 249 percent in Orlando.

View full Q1 2008 foreclosure report.

For the third month in a row U.S. foreclosure activity registered at more than 50 percent above the level it was at a year ago, according to the March RealtyTrac U.S. Foreclosure Market Report. And for the second month in a row, the number of bank repossessions, or REOs, was up more than 100 percent year over year.

The implication: while significantly more homeowners are falling into foreclosure, there is an even bigger increase in the number of homeowners already in the process who are losing their homes to foreclosure — whether through the typical foreclosure sale mechanism or whether by pre-empting the public foreclosure sale through what is called a deed in lieu of foreclosure.

In the latter case, the homeowner offers to convey ownership of the property to the foreclosing lender. The lender also has to agree to the DIL arrangement, which may involve clearing out other liens secured by the property. But that may be better than the alternative — a costly and lengthy process that will quite likely end with the bank repossessing the property anyway.

The year-over-year increase in bank repossessions was even more dramatic in some states: 619 percent in Arizona; 597 percent in New York; 557 percent in California; and 464 percent in Florida.

View full March report.

The Wall Street Journal is reporting that more and more homeowners forced out of their homes by foreclosure are turning to vandalism to lash out in some tangible way in a situation where they feel powerless. Las Vegas is used as a backdrop for the story, not surprising given that the foreclosure rate in Las Vegas consistently ranks among the top 10 metro foreclosure rates, according to RealtyTrac.

The article claims that "real estate agents estimate that about half of foreclosed properties to be sold by mortgage companies nationwide have 'substantial' damage, according to a new survey by Campbell Communications, a marketing and research firm based in Washington, D.C." And there are some real horror stories described by agents cited in the article: ferret droppings along the baseboards, walls pocked with holes, appliances and light fixtures ripped out, a trail of motor oil dripped on all the carpets throughout a house.

But it seems there is a certain urban-legend element to these stories as well. One agent quoted in the video that accompanies the article says that he's even heard of homeowners pouring cement down the toilet. That seems to be the most common story used when people talk about foreclosure vandalism, although I've yet to hear one concrete (pun intended) example of this happening in real life. But even if it isn't true, the lesson taught by these types of urban legends is still very important for foreclosure buyers and investors: when you buy a foreclosure property without being able to conduct a full inspection first, make the assumption that the property is substantially vandalized and calculate rehab costs into your offer.

And if you happen to have any cement-pouring stories, or any other horror story of vandalized foreclosure property, please share it here. With apologies to Prison Mike from "The Office," we want to scare rookie foreclosure buyers and investors straight.

With a speech given today in Philadelphia, Sen. Hillary Clinton reinforced her standing as the presidential candidate with the most far-reaching and concrete proposals calling for government intervention to save homeowners from the sins of greed and bearing false witness that were rampant in mortgage lending over the past few years.

The payment for those sins is often foreclosure, but Clinton wants the government to become a Messianic figure for homeowners facing foreclosure — and by default also for many lenders who approved problem loans for those homeowners — by forgiving these sins and bearing the transgressions of malevolent mortgages that no other lender or buyer is willing to touch.

"That’s why I believe the Federal Housing Administration should also stand ready to be a temporary buyer — to purchase, restructure, and resell underwater mortgages," Clinton said in the speech at what was billed as the "Solutions for the American Economy" event.

Giving the FHA the ability to buy trouble mortgages would act as a safety net to legislation proposed by fellow Democratic Sens. Barney Frank of Massachusetts and Chris Dodd of Connecticut.

"The Frank-Dodd legislation would ... (set) up an auction system for mortgage companies that hold hundreds of thousands of these mortgages. Through this system, these companies could sell mortgages in bulk to banks and other buyers. The buyers would be willing to purchase these mortgages — and restructure them to make them affordable for families — because they know the government will guarantee them once they are refinanced," Clinton said, not long after setting up the problem by citing RealtyTrac's statistic of 2.2 million foreclosure notices filed in 2007, up 75 percent from 2006.

But because she doubts the sufficiency of this plan to help all homeowners, Clinton called on President Bush to form an "emergency working group on foreclosures" to step in and evaluate the plan along with her proposal to have the "government step in as a purchaser."

Clinton believes that her proposal to allow the FHA to purchase loans "would cost taxpayers nothing in the long run" because it would not create a new federal bureaucracy and would be designed to be "self-financing over time." Whether that is a realistic belief is questionable based on the tendency of government programs to overreach and overspend. 

The bottom-line question is this: Should government act as a savior willing to take on the foreclosures of the world, or should it take a more tough-love approach and let the market work through the consequences of its actions? Let us know what you think.

February foreclosure activity was down 4 percent from the previous month but still up 57 percent from February 2007, according to the latest RealtyTrac U.S. Foreclosure Market Report. So does the monthly decrease mean we've hit a ceiling of sorts for this cycle in terms of foreclosures?

Probably not.

The February monthly decrease is more likely a seasonal decrease helped along by a shorter-than-average month and the fact that January's numbers are often padded with some pent-up foreclosure activity from the holiday season. That premise is supported by looking at the numbers in February 2007, when U.S. foreclosure activity was down 6 percent from January. Foreclosure activity continued to climb for the remainder of that year.

The more important indicator is the year-over-year increase, which has been between 50 percent and 60 percent for both January and February. If you look back at the RealtyTrac monthly reports, activity has increased on a year-over-year basis every month since January 2006, the first month that YOY stats were available.

So the overall trend -- at least on a national basis -- is steadily upward. Eventually the bleeding will stop, and the fundamentals of a healthy real estate market will be restored. The million dollar question (or millions and millons of dollars if you're a really smart investor) is, when will that be? Will we see another series of three more lines that are all higher than the lines in the graph above, or will there be just one more year of rising foreclosures, or two? Let us know what you think.

View full February report.

For the second time in less than a month, the real estate bubble has burst on a rich and famous homeowner’s palatial estate. Following closely on the heels of another trophy property recently sold on the auction block, Michael Jackson's Neverland Ranch is set to possibly suffer a similar fate.

On March 19, at 1:00 p.m., Michael Jackson's Neverland Ranch in Los Olivos, Calif., is scheduled for a public auction at the Santa Barbara County Courthouse at 1100 Anacapa Street. The opening bid is estimated to be at least $20,000,000. The sprawling Jackson estate — located at 5225 Figueroa Mountain Road — sits on 2,800 acres of rolling hills in California’s wine county north of Santa Barbara. Financial Title Co. filed the notice of trustee’s sale with the Santa Barbara County Superior Court on February 26th. 

View auction notice on RealtyTrac.

“We are starting to see evidence of a rise in high-end foreclosures across the nation,” said James J. Saccacio, chief executive officer at RealtyTrac. “With the auction of the Hearst mansion in Palm Beach, Fla., and the scheduled auction of Michael Jackson’s Neverland Ranch, it appears that even the rich and famous are not immune to foreclosure.”

Last month, the oceanfront south Florida mega mansion owned by the widow of publishing heir Randolph Hearst went on the auction block at the Palm Beach County Courthouse. Veronica Hearst’s Manalapan estate — known locally as Villa Venezio — was auctioned for $22 million. Sitting on 3.5 acres of beachfront property, the 32,000 square foot trophy mansion — complete with 9-bedrooms and 12 full bathrooms — was originally built in 1929 for the grandson of Cornelius Vanderbilt.

Although they were up 57 percent from January 2007 and 8 percent from December, the January foreclosure numbers released today by RealtyTrac  do not appear to represent the massive wave of foreclosures that is expected to hit sometime soon thanks to the rash of risky loans given to borrowers as late as just last year.

It's too early too tell if the relatively meek January numbers mean more distressed homeowners are staving off foreclosure thanks to increasingly pro-active lenders and government intervention, or if they just represent the first few raindrops of what will prove to be a violent thunderstorm.

And in either case, does that make the current market a good one in which to buy or invest in real estate? Or is it better to wait until the market falls further? Of course, the answer will vary from region to region, but provide supporting evidence from your area.

View full report with state-by-state data.

As requested by Jack in a previous post, here is a fourth quarter foreclosure activity map for Montgomery County, Ala. Certainly, the activity is not as dense here as in some of the other maps we've posted, but there still seems to be a good amount of activity.

Per a request from Roland in our blog post about Stockton, Calif., foreclosures, below is a map showing foreclosure activity in Oklahoma County, Okla.. You may notice that this map is not as crowded as the Stockton map. That reflects a foreclosure rate in Oklahoma County that was below the national average for 2007, with 0.915 percent of its total households in some stage of foreclosure. The county's foreclosure rate was third highest among Oklahoma counties for the year despite a 19 percent year-over-year decrease in foreclosure activity.

Search Oklahoma County foreclosures.

Arguably the most influential television news magazine, 60 Minutes, last night spent more than 15 minutes — an eternity in television — focusing on the so-called Subprime Meltdown. The town they chose to use as a backdrop not surprisingly was Stockton, Calif., which ranked No. 1 in terms of nationwide metro foreclosure rates in both the third quarter and November, according to RealtyTrac.

Much of the 60 Minutes piece stuck with the standard storyline: greedy lenders offered piles of money to anyone who could fog a mirror without really caring if the loan could or would be repaid. That's because the lenders could easily turn around and sell the loans to greedy Wall Street firms who wrapped up the loans in pretty packages and sold them to investors.

However, to their credit, the producers of the piece also included one contributing factor to the unfolding debacle that is not emphasized much in the media: the greed of the homeowners and investors who took advantage of these loans, and the ability of many of those people to walk away from the properties without feeling much immediate pain in their pocketbooks. That's because many of these buyers took out 100 percent financing, so the only money they've shelled out for the property is the monthly mortgage payments — which of course they have stopped paying if they are now in foreclosure. View video.

RealtyTrac will be releasing its December, fourth-quarter and year-end numbers tomorrow morning, and we'll have the full details posted on this blog immediately when they are released (5 a.m. EST, 2 a.m. PST). But for now, here's a little taste of what to expect from Stockton. Below is a map showing fourth-quarter foreclosure filings in the area, broken down by type of filing. We'd like to hear from folks in and around Stockton about whether this represents what they're seeing in the area. And if you'd like a similar map of your area, submit your request via comment and we'll try to provide it for you.