Sharp Drop in Foreclosures Last Year But More on the Way

Foreclosures were down in 2011, but does more trouble await the housing market in 2012?

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Home foreclosures were down quite a bit last year, but that positive piece of news could mask troubles further down the road for the housing market in 2012 according to a new report.

Although foreclosure filings fell 34 percent last year to their lowest level since 2007 according to RealtyTrac, experts expect to see an uptick in filings this year as foreclosure processes, delayed by legal issues, ramp up again.

More than 4 million Americans have already lost their homes to foreclosure since the beginning of the housing mess in 2007, and fresh stock filtering through the pipeline in 2012 could prolong the wait for a rebound in housing prices.

"A lot of the foreclosures that would have happened in 2011 have been pushed to 2012," says Daren Blomquist, director of marketing communications at RealtyTrac. "That's going to make 2012 a higher year in terms of foreclosure activity."

[Read: Unemployed Homeowners Get a Break From Freddie Mac.]

Housing values continue to trend downward and more supply on the market fueled by new foreclosures in 2012 could keep prices lower for longer. That's bad news for the more than 6 million Americans grappling with underwater mortgages.

But there is a silver lining: Even with foreclosure processing delays, "we're past the peak in foreclosures," Blomquist says, adding that ideas being tossed around about how to deal with the glut of foreclosures on the market is a step in the right direction.

Earlier this week, reports that the White House planned to move forward with plans to sell government-owned properties in bulk to investors were met with mixed reactions. Still, the simple acknowledgement of the nation's foreclosure problem is positive, says Blomquist.

"Some of these foreclosures just aren't very appealing to individual buyers," he says. "We need to look to real estate investors both on an individual level and an institutional level to handle these."

mhandley@usnews.com

Twitter: @mmhandley

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