Foreclosures actually fell year-over-year in April according to RealtyTrac.  This is the first drop since RealtyTrac started tracking the number of foreclosure notices.

The drop was only 2% which I suspect will be wiped out with increases in foreclosure filings in the second half of the year.  This drop can be attributed to many of the pressure banks are receiving from the government, consumers, and media to try new work out programs with debt holders.

Despite the 2% drop, there were still over 300,000 foreclosure filings in April.  The number is plateuing and next year we’ll start seeing significant decreases.

Other interesting stats in RealtyTrac’s report

• 6 states accounted for more than half of April’s bank repossessions nationwide
• Nevada tops the list in rate of filings for the 40^th consecutive month
• Foreclosure rates dropped in both California and Arizona

The good news for housing doesn’t stop there.  9 of the top 10 leading metropolitan areas for foreclosure-related activity showed a drop in annual activity.  Only Reno, Nevada showed an increase.

Buying distressed homes is big business, according to the National Association of Realtors, accounting for 35 percent of all home resales with a typical discount ranging near 15 percent on value.  While many investing out of state are looking for improved properties, I still think there is a larger value in buying the distressed assets if the right team is in place to improve it.

But with the discount comes some caution. You need to know how buying a foreclosed can be different from buying a non-foreclosed home.   For example, distressed properties are often sold as-is and may have defects that render them “un-lendable”.  Secondly, fast closes aren’t usually possible with bank-owned homes.   Thirdly the number of competing offers makes this process especially difficult.

And, lastly, not all foreclosed homes are searchable online. You’ll usually find more stock if you work with a real estate agent or investment property firm versus searching online.  I’ve personally seen much of the data online being a little dated too.

You’re likely to see a lot more inventory now that the home buyer tax credit has expired maybe even driving prices down a bit.  During this period of slight price declines, appraised values will actually rise as the purchases from the tax credit start being logged.  Appraisers will be using these recent comparable sales to value your new purchase or refinance.  This could be just a short window of 3 months or offering an opportunity to purchase a distressed asset using bridge financing (hard money), and get a very favorable refinance.

-    Ryan Hinricher, Housing Analyst

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The existence of a large shadow inventory has become hotly debated in real estate circles.  I wrote an article on the Bigger Pockets real estate investment blog discussing what exactly the shadow inventory is and its potential impact on the real estate economy.

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