Foreclosures Actually Dropped (If You Don't Count Five States)

by: Mark J. Perry

IRVINE, Calif. – Sept. 12, 2008 – RealtyTrac, the leading online marketplace for foreclosure properties, today released its August 2008 U.S. Foreclosure Market Report, which shows foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 303,879 U.S. properties during the month, a 12% increase from the previous month and a 27% increase from August 2007.

Foreclosure filings were reported on 101,724 California properties in August, one-third of the national total and the most of any state. The state’s foreclosure activity increased more than 40 percent from the previous month and more than 75 percent from August 2007. California, Florida and Arizona together accounted for more than half of the nation’s foreclosure activity.

That last sentence motivated the analysis displayed in the chart above. If you exclude the five states with the biggest foreclosure problems (Arizona, California, Florida, Michigan and Nevada), and analyze foreclosures for the remaining 45 states, the results change dramatically. From July to August, foreclosures actually declined by -.41% in those 45 states, compared to a +12% increase when AZ, CA, FL, MI and NV are included. Over the last year from August 2007 to August 2008, foreclosures barely changed in the 45 states, increasing less than 1% (0.89%), much different than the 27% increase with all states.

Bottom Line: Foreclosure problems are highly concentrated in just five states (AZ, CA, FL, MI and NV), which distorts the national picture significantly. Excluding the five states with the biggest foreclosure problems suggests a much less severe problem, and an actual improvement in August foreclosures in the other 45 states (-0.41% vs. July).


(Note: Foreclosure data are available at RealtyTrac for August 2008. Using the August 2008 foreclosure levels by state and the percent changes from July 2008 and August 2007, the foreclosue levels for August 2007 and July 2008 were calculated for each state. The five states listed above were then excluded to calculate the percentages in the table above.)