Home and hourglass image via Shutterstock.

Inventories of bank-owned properties fell year over year across four Western states in July even as lenders took longer to get those properties off their books, according to the latest report from real estate data company ForeclosureRadar.

The report covers foreclosure trends in California, Arizona, Nevada, Washington and Oregon. Of the five states, only Oregon did not see its bank-owned inventory drop last month.

In California, the number of homes repossessed by lenders but not yet resold, known as bank-owned or real estate owned (REO) inventory, was down 36.4 percent to 66,000 properties last month. Banks sold REOs in 283 days on average, up from 232 days in July 2011. By contrast, homes bought by third parties at auction, usually investors, were resold in an average 138 days, up from 128 days a year ago.

Nonetheless, there are some signs the pipeline of foreclosures in the Golden State is speeding up a bit. Foreclosure starts rose 12.3 percent year over year in July to 21,175. The average number of days between the initial notice of default and the end of the foreclosure process (with the property either sold to a third party or repossessed by the bank) was 276 days last month (equivalent to about nine months), down from 310 days (about 10 months) a year ago.

Among the California homes in the foreclosure process whose fates were decided in July, most (10,398) experienced a cancellation of the process due to a successful loan modification or short sale, among other possible reasons. The number of properties that went back to the bank as REOs declined 54.2 percent on an annual basis to 4,512. Foreclosure sales to third parties fell 6.6 percent to 3,269.

In Arizona, foreclosure starts fell 28.2 percent year over year in July, to 4,433. Foreclosure cancellations were down 4.4 percent annually, to 3,575. The number of properties that went back to the bank as REOs decreased 33.8 percent year over year, to 2,191. Those sold to third parties rose 3 percent on an annual basis, to 1,630.

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Arizona’s REO inventory fell 38.1 percent last month, to 14,784. While the time to foreclose declined to an average 136 days from 175 days in July 2011, the time between when the bank took back the property and the property was resold rose a whopping 64.9 percent, to an average 244 days in July. Third parties resold properties in less than half that time, 107 days, up from 94 days a year ago.

Foreclosure activity in Nevada has slowed to a trickle, likely as a result of a Nevada state law that went into effect in October designed to crack down on documentation irregularities by foreclosing lenders.

In July, Nevada foreclosure starts were down 61.8 percent, to 1,618, compared with 4,235 a year ago. Foreclosure cancellations were down to 800, a nearly 60 percent drop from July 2011, but the number of properties becoming REOs dropped even more precipitously, 77.8 percent, to only 394 properties. The number of properties sold to third parties on the courthouse steps fell 34.4 percent, to 429.

The state’s REO inventory was down 63.8 percent to 5,541 in July with the number of homes in the foreclosure pipeline dropping by more than half year over year. It took nearly 46 percent longer to foreclose on a property last month than it did in July 2011: an average of 471 days — the equivalent of nearly 16 months. Banks also took considerably longer to sell homes once they’d repossessed them — an average 221 days, up from 154 days a year ago. Third parties resold in an average 133 days, up from 98 days.

In Washington state, time to foreclose was virtually unchanged from a year ago in July: 102 days on average. Foreclosure starts were up 13.1 percent to 2,527. Cancellations fell 59.5 percent to 601. The number of properties that went back to the bank as REOs fell 67.1 percent to 595. Foreclosure sales to third parties fell 36 percent to 151.

As in the aforementioned states, REO inventory in Washington fell substantially last month: down 42.2 percent to 6,554. Banks took an average of 249 days to resell an REO property, up 25.9 percent. By contrast, third parties took an average 107 days to resell, down 24.1 percent.

In Oregon, foreclosure starts were down 58.6 percent year over year in July, to 426.

“This is most likely related to both the new Oregon law, SB 1552, that gives homeowners at risk of default, or in default, the right to request mediation to avoid foreclosure, as well as the Oregon Court of Appeals ruling that may force some lenders to proceed judicially with foreclosures,” the report said.

“It is still not clear whether this is a temporary decline or part of a move toward judicial foreclosure in Oregon.”

Lake house image via Shutterstock.

I continually find myself tempering the exuberance of homeowners who are absolutely dead set on the idea that all home values will soon appreciate.

The latest example occurred on a long bicycle ride around one of my favorite mountain lakes. I try to make the trip a few times a summer, but the weather and writing deadlines often get in the way. This past week, I was aware of a rising number of for-sale signs (both national firms and for sale by owner) on lakefront homes. One particular home had been on the market at least two years, and a “price reduced” label hung from the bottom of the sign.

As I approached the driveway, the owner shut down the motor of his power trimmer. After we exchanged pleasantries, he launched into his hopeful pitch.

“I’m pretty sure it’ll sell this summer,” the owner said. “We reduced the price again and things are looking better as far as the economy is concerned. I’m sure the worst is finally behind us. Prices will be going up.”

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But that does not necessarily mean the owner will get back all the money he’s put into the property. He overbuilt for the area, including expensive interior finishes and furnishings.

I remembered when the house was built — the first real home among older cabins on that stretch of the lake road. The place has four bedrooms and three baths, with a paved driveway and tile roof. A rolling lawn leads to a nice dock and boathouse. It was the man’s second home, but it is larger and nicer than any home we’ve ever owned.

When I researched the home online, it showed the price as $100,000 below the assessed value assigned by the county. If the owner of the lake home found a buyer this summer, he would lose a significant amount of money at closing. In his view, finding a buyer — any buyer — would suffice.

While still online, I came across the latest statistics from CoreLogic, a research company that specializes in residential mortgages. The company reported that while 700,000 homeowners regained home equity via rising home prices in the first quarter of 2012, approximately 11.4 million owners — or 23.7 percent of all mortgages — were still underwater.

Obviously, most of the stats refer to primary residences. Second homes, while attractive and “rentable” during the prime weeks of summer, are viewed as a luxury purchase and off the charts of what the average consumer needs. So, while the summer season has brought out more second-home buyers than a year ago, a number of sellers still owe more than what the market will bear.

Those owners who bought decades ago and have decided now is a good time to put their homes on the market will undoubtedly make a profit — not the profit they could have made four years ago, but a profit nonetheless. However, those owners will be facing competition from others simply trying to break even who feel now is a good time to test the market.

This “shadow inventory” (an example of the 700,000 equity gainers mentioned above) would have hit the market earlier had the selling environment been more attractive. So, two important questions remain: How much shadow inventory is out there (where’s the true bottom?) and what factors continue to hold back potential homebuyers?

While interest rates and home prices are attractive, buyers are still skittish to roll the dice. Some neighborhoods and resort areas are receiving multiple offers — supporting the idea that all real estate is local — but the national accelerator is nowhere near the floor. Inquiries are up by 59 percent, according to a survey conducted by the Real Estate Buyer’s Agent Council, but closed deals are not following that pace.

REBAC surveyed its buyer agent members to determine the top issues preventing homebuyers in their local markets from completing a home purchase. The top three obstacles identified in its 2012 survey are:

1. Economic insecurity.
2. Difficulties in obtaining financing.
3. Problems selling current home.

Most of the focus in the sluggish housing market has been centered on the number of foreclosures still in the pipeline, homes that lenders are bringing to the market at a glacial pace. But little has been said about the number of households that are current on their payments that have been waiting for the first glimmer of light to sell and move on.

The same can be said about second homes. The first glimmer of light will bring more homes to the market. In many areas, there will be more competition from those who have been waiting for the free fall to stop. Significant appreciation, however, could be a long way down the road.