Fewer Foreclosures Now. More Foreclosures Later

The number of homes in foreclosure fell sharply in the first half of this year. But that doesn’t mean the housing market is getting better.

It just means the foreclosure process has stalled as lenders and state attorneys general try to work out a settlement over the robosigning scandal.

And it means that a million or so foreclosures that would have happened this year will be pushed back into next year, according to the mid-year foreclosure report RealtyTrac released today.

In the first half of this year, 1.2 million homes were in foreclosure, a decline of 29 percent from the first half of last year.

There are an additional 3 million homeowners who haven’t paid their mortgage for more than two months — but who are not yet in foreclosure. Historically, most people who are that far behind on their mortgage wind up in foreclosure, RealtyTrac VP Rick Sharga told me.

Foreclosed homes put downward pressure on home prices (they typically sell for a big discount) and reduce demand for newly built homes.

So the slowdown in foreclosures in the first half of this year, combined with the overhang of delinquent mortgages, “will delay the housing market recovery … until 2015 or even later,” Sharga said.