Every month the media, and I as well, dutifully report on foreclosure activity as tracked by RealtyTrac. And although the numbers are clearly qualified, I suspect that we all tend to vaguely interpret them as representing the number of properties entering the foreclosure process. But that’s not what the numbers really mean at all. In fact, the RealtyTrac reports are pretty clear that they “show foreclosure filings — default notices, scheduled auctions and bank repossessions…Some foreclosure filings entered into the database during the month may have been recorded in previous months.” In other words, as a home moves through the foreclosure process it will be counted multiple times as different types of filings occur. In other words, there is some double and triple counting going on so the numbers overstate what we are really interested in.
I emailed RealtyTrac for some additional clarification on this and here is the response I got from Daren Blomquist, Director of Marketing Communications:
Yes, a property could show up as a default notice one month and then as an auction and then even an REO in subsequent months. We do provide the data broken down by type so people can see the trends in each category of the foreclosure process. I should note that when we run our quarterly and annual summary reports, we do not just sum up the monthly totals in the quarter or year; instead we run a separate report that only counts a property once during the quarter or year, even if it has had multiple foreclosure filings during that time frame.
If the same type of notice is filed against the same property multiple times we only count the record the first time it is filed unless the last time the notice was filed was outside of the estimated time to foreclose in the state the property is in. So for instance if a Lis Pendens in Illinois (default notice) is filed on a property at 123 Main Street in January and then another Lis Pendens is filed on the same property in February, we only count that as a default notice in our January report. We do not count it in our February report. However, if a Lis Pendens is filed on the same property in January of the following year we will count it again because that is longer than our estimated time to foreclose in Illinois.
So my takeaway from all this is that you are better off focusing on the individual components of the foreclosure process, but unfortunately that data is not available at the local level. The other takeaway is that the annual numbers are more meaningful than the monthly numbers because there is less double and triple counting going on.
Nothing is easy.