The number of foreclosed properties in the Bay Area repossessed by lenders declined 20% in October from September, as the region was affected by the foreclosure moratorium enacted in September by major lenders.

However, this drop is only temporary, and now that most of these lenders have lifted the freeze, which was initiated over reports of robo-signing of court documents used in the foreclosure process. As there was a year-to-year increase it’s natural to have an increased number of home repos although there was a decline on a month-to-month basis.

A report released these days by RealtyTrac, showed that in the Bay Area some 1,383 foreclosed homes were taken back by banks last month, meaning a 20.3% decrease from September, but a 46% increase from the same month a year prior.

"The freeze did slow foreclosure activity in both the Bay Area and in California on a month-to-month basis," said Dare Blomquist, marketing and communications director for RealtyTrac. "It’s interesting. We are seeing more of an impact in nonjudicial foreclosure states."

The foreclosure moratorium was applied to 23 states that required going to court as part of the foreclosure process before a home can be repossessed by the bank. California is not on the list. The moratorium was later applied to all 50 states.

The California REO inventory increased with 13,754 foreclosed homes, which is a 22.5% drop from September and 8.4% less than a year prior. Nationwide, banks repossessed a total of 93,236 homes, meaning – in numbers – a 8.7% drop from September but a 21% increase from the same month in 2009.

Because of its shadowy properties there are some questions marks around the amount of the Shadow Inventory. According to DataQuick, Bay Area can be ‘proud to have’ more than one third of the REOs – that is they are not registering in county records as having been resold.

Starting from January 2007 through February 2009 banks repossessed 51,602 homes and condos in the nine-county area. During the same period only 30,823 foreclosures were resold. This leaves around 20,000 bank repos unaccounted for.

And this is only one part of the Shadow Inventory. On the other had another wave of foreclosures are in the pipeline. These properties are delinquent with their payments and the bank is preparing the foreclosure process. Some of these might get out with a loan modification or other way to keep the home.

Another important factor is that some banks price a little higher the property which just hit the market. With around 10%. Banks typically lower the listing price every 30 days. If the bank is pricing the property 10% over market then it could take at up to 60 days to get the property priced correctly.  By that time the property is stale and those potential buyers have moved on.

In the end, the exact number of properties in the Shadow Inventory remains in the shadow.  What is obvious: the number of distressed properties is continuously rising and the economical setup isn’t helping the situation – and we are referring to the current economical situation, the high unemployment rate which are major facts influencing the housing problems.

The total home sales in March, in all the counties of the Bay Area, were recorded as 6,992 properties closing escrows. This shows an increase by 40.2 percent from the figure of February and again up by 10.5 percent from March 2009, when only 6,325 homes were sold. It is noteworthy that the Bay Area home sales have continued to record increase during February and March every year from 1988.

Two favorable comparisons can still be made. March home sales were the first to show a year-over-year increase in sales, since December 2009. Secondly for the month of March, the total sales made were the highest since 8,317 homes sold in March 2007, although it fell short by 22.4 percent of the average number of homes sold in March – 9,016 properties – since 1988.

As regards home sales made out of foreclosure properties, in the month of March the participation is recorded as 31.7 percent of total home sales, from properties lying under pre-foreclosure, scheduled foreclosure auction and repossession by lenders after foreclosure sale public auction.  On comparison, foreclosure property sales peaked at 52 percent of total sales in February 2009, 50.2 percent in March 2009 and this March the figure is down from 36.3 percent recorded in February 2010.

Another area-specific fluctuation observed in SF Bay Area is the jumbo loan market – with the specified limit of $417,000 for high-end home purchases – is lying low now. Before the credit crunch hit the market in August 2007, nearly 60 percent of Bay Area home loans were falling under this segment, compared to last month’s jumbo loans made up a mere 29.5 percent.

The reason for the above decline is lack of interest by borrowers in Adjustable-Rate-Mortgages (ARMs). Prior to the credit crunch in 2000, the average home loans through ARMs was 50 percent, declined to 13.7 percent of all home purchase loans in September 2008 and dwindled to mere 8.7 percent in March 2010.

Here is an example in San Jose – came to light recently. A former nurse, after losing her job and paying the mortgage promptly from her savings, wanted to exercise Short Sale option for her condo in a beautiful location of San Jose. During March 2009, she listed her property for $249,000 – less than the price she paid four years back, namely $435,000 – and less than what she owed to the mortgage lender.

To explain the Short Sale procedure – it is a complex one. If the lending bank holds the first lien, it would be fairly easy in the sense that you get the approval in months. But this is not the case mostly. The mortgage is owned by investors through securities and the lender is only servicing the loan or collecting the monthly payments towards the loan. The stipulation is all the mortgage lien holders should approve the Short Sale.

Generally the lenders are reluctant to come forward to grant their approval to Short Sale application – the obvious reason being losing money out of the “forgiven” amount in a Short Sale. Often times there are many excuses – like in the San Jose case above – the concerned document file was “missing” more than once – there was switching of computer systems in another.

The foreclosure process has already begun in the meantime, through a Trustee Sale public auction and it was postponed for four times, since the borrower was “waiting” for the lender’s approval.  The mental agony of the individual, opting for the Short Sale route, needs no elaboration. Finally after a delay of 11 months, one buyer family clung on their offer considering the location of the said condo and bought it four weeks ago.

Despite all these, statistics reveal 23 percent of home purchases in Santa Clara County and 12 percent of total home purchases in San Manteo County in March were Short Sales – up by comparison to last year.

According to latest statistics on foreclosure activity in California State, for the first 3 months of 2010, the number of default notices issued to delinquent home owners dropped by 4 percent to 81,054. In the SF Bay Area in particular, the number of mortgage defaults dropped by 35 percent in the first 3 months, compared to the quarter ended December 2009, to 13,517 default notices.

As regards home sales there is also good news. In the Bay Area, the total number of residential properties sold jumped to 6,992 in March, compared to 6,325 units sold in March 2009, showing an increase of 10.5 percent.

Similarly the median price of existing homes, condos and newly-built houses in the SF Bay Area soared to $380,000 in March this year. Compared to the median price that was prevailing in March last year – $290,000 – a good 31 percent increase in the home prices is recorded. Even compared to February median price of $354,000, this is an increase of 7.3 percent.

Local realtors are of the view that the rise in median price is attributed to increase in sales of high-cost residential properties partly and also the decline in sale of foreclosure properties reported in the market statistics.

Another notable trend, according to market analysts is, the foreclosure pace in respect of lower-cost markets is slowing down, unlike the immediate months following the foreclosure crisis. Instead, it is on the increase on the higher-cost markets, escaping the after-math of foreclosure problem earlier.

Bank repossessed properties after foreclosure sale public auction reached 8,203 properties, showing a drop by 13.48 percent compared to the last quarter of 2009. When compared to the trend in the country during the first three months, this is encouraging as well.

But as a freak occurrence, the number of actual foreclosures rose to 193 properties in San Francisco County, an increase by 91 percent in the first quarter. However considering the number of properties available for sale, this is quite small in number.

Home sales in the open market is continuing the below average pace in the month of March also, but the figure rose sharply from the previous month and reached a three year high. The overall median price of properties in Bay Area is up by 30 percent to $380,000 from what it was in March 2009 – an absurdly low $290,000.

Lower-cost inland communities recorded a dip in home sales compared to same period last year, whereas in the higher-cost coastal areas, it is observed to be on the raise. The present median price is comparatively higher by 7.3 percent from February figure of $354,000.

For the Bay Area home sellers the peak was reached in median price of homes during the period June and July 2007, when it was a staggering $665,000 – spoiled later on by the foreclosure crisis plaguing the country.

The number of homes sold closing escrow in the Bay Area for March was 6,992 homes – an increase by 40.2 percent from the month of February. Compared to March 2009 figure of 6,325 properties, this is 10.5 percent increase. However one cannot but think of the peak figure – 8,317 Nos. – in March 2007.

Coming to foreclosure re-sales, properties that were foreclosed in the last 12 months in the Bay Area made up a sizeable 31.7 percent in March, out of the total resales made. Compared to March 2009 when it was 50.2 percent (the peak being 52 percent in February 2009) this is down and also a decrease compared to 36.3 percent this February.

A notable phenomenon in foreclosure re-sale homes is over the past one year, the sale of lower-cost foreclosure properties is tapering down, whereas it is going high in the medium to high priced neighborhoods.  For example, 34.6 percent of homes sold in Bay area were priced at $50,000 and above.