The "foreclosure wave" many predicted at the end of last year is beginning to look more like drought, as foreclosure sales dropped significantly in February. Although sales to 3rd Parties, typically investors, were down month-over-month, as a percentage of all sales 3rd Parties purchased a record 37.6 percent of foreclosures, up from 20.3 percent a year earlier, and just 2.2 percent in February 2008.
Further eliminating any possibility of a foreclosure wave for months to come, was a substantial drop in new foreclosure filings in California, Nevada, and Washington. Arizona saw a modest increase in foreclosure starts, while Oregon jumped a dramatic 39.4 percent. Despite the size of the increase, it simply offset a drop in January and showed little change in comparison to earlier months. Nevada remains far below the average number of foreclosure starts, and the dramatic changes to its foreclosure laws will likely drag out the Nevada foreclosure process for years to come.
Unlike years past, February's drop in sales was not due to the short month. Thanks to the Leap Year, California had only one less business day than usual in February (because of Abraham Lincoln's birthday observation). The other states do not observe Lincoln’s birthday, and thus had the same number of business days as other months.
“Government intervention into the foreclosure crisis has clearly succeeded in slowing foreclosures. Unfortunately, it has also largely failed to deal with the real problem—negative equity. While principal balance reductions and short sales are friendlier than foreclosures for eliminating negative equity, foreclosures are extremely effective, if perhaps crude, cure as well.” Stated Sean O'Toole, Founder & CEO of ForeclosureRadar. “While I believe banks should be strongly encouraged to work with homeowners who fall behind, there will be uncooperative homeowners. Passing laws to essentially eliminate foreclosures, as they appear to have accomplished in Nevada, and are now contemplating with similar draconian measures in California, is likely to do more harm than good. The pendulum of regulation is once again swinging too far.”