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Experts Optimistic on Housing Recovery After Foreclosures Reach Five-year Low

Many people have failed to notice that the real estate market is starting to show surprising signs of strength. The latest piece of good news has come from a report by RealtyTrac, an internet company that specializes in the foreclosure market. According to their most recent numbers, year-over-year foreclosure filings fell by 16% in September, reaching their lowest levels since 2007. In addition, given that year-over-year foreclosure filings have declined for 24 consecutive months, there is little reason to believe that this trend will not continue in the immediate future.

Foreclosures and declining home prices.
The Federal Reserve Bank of New York has reported that more than three million homes have gone through the foreclosure process since the financial crisis began; these homes are often sold by banks, which are desperate to unload them to raise liquid capital, at distressed prices, creating a reinforcing cycle of declining prices that puts even more homeowners underwater on their mortgages. Inevitably, this process leads to yet another round of heart-wrenching foreclosure filings.

Is the foreclosure cycle ending?
Although it is certainly too soon to announce the arrival of a full-fledged recovery in the housing market, the latest foreclosure news has increased optimism among real estate professionals that prices may start to rebound in the coming years. According to a quarterly survey by HomeGain, an online company that provides real estate valuations for homeowners, four-fifths of professionals within the industry and nearly two-thirds of those who own a home expect housing prices to increase in the next 24 months.

Prices may be rising nationwide.
In fact, the Standard & Poor's Case-Shiller index, the most widely used measure in evaluating nationwide housing prices, indicates that prices may already be rising. In July, the most recent month in which results are available, housing prices registered an annual gain of 1.2%, a relatively modest, yet psychologically important, improvement. This is welcome news for homeowners. At the same time, people who are looking to buy homes can still benefit from historically low interest rates, which are still below 3.5% for a fixed-rate 30-year mortgage.

Declining foreclosures, increased optimism and low interest rates could be the foundation of a housing market recovery.