Appraisal industry experts have posited that real estate markets rebound much faster in areas where state
law permits foreclosures to proceed quickly. Allowing homes with defaulted loans to move into new
owners’ hands quickly prevents them from being tied up in court procedures for years, which negatively
affects values of neighboring properties and the overall health of the housing market.
Making sense of the story:
Delays are most pronounced in judicial states, where post-default proceedings can stall
foreclosure completions for two to three years or even longer.
The fastest-rebounding markets, comprised of strong sales, price increases and low inventories of
unsold houses, were located in so-called nonjudicial states, where foreclosures can proceed
without the intervention of courts.
Home-price recoveries are hindered when lenders are prevented from recovering and reselling the
units to buyers due to legal limbo. Also, investors and other buyers can’t swoop in and return
them to residential use rapidly.
Since California is a nonjudicial state, some of the best-performing market areas were Los
Angeles and San Diego. In California, foreclosures now account for just 10 percent of all sales,
while in slow-moving judicial states, 25 to 50 percent of sales are foreclosures.
The worst performers were judicial states. Specifically, Florida markets such as Tampa and Fort
Myers, as well as parts of Illinois and Wisconsin.
Research reveals nonjudicial states bottomed out sooner than judicial states, and have seen greater
appreciation since the bottom (typically 50 to 80 percent compared with just 10 to 45 percent for
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