One of the Dumbest Articles: More Foreclosures Leads to Fewer Underwater Mortgages

According to a CoreLogic report released today:

There were fewer homeowners underwater on their mortgage at the end of the third quarter than the second quarter, but it's because more properties that had severe negative equity were foreclosed upon not an increase in home values.


"Negative equity is a primary factor holding back the housing market and broader economy," according to Mark Fleming, chief economist with CoreLogic. "The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement in negative equity."

This has to be one of the Top 10 silliest statements of the entire foreclosure debacle.  These foreclosed properties are almost invariably being held in bank REO inventory.  As previously pointed out in this blog, the banks are actually holding back on listing much of this inventory so as not to depress prices even further.

The idea that foreclosures are somehow reversing the price or equity decline would be like the AMA offering a statistic that people are all of a sudden healthier - only because a large portion of the sickly just died off.  You absolutely cannot read any article written by the National Association of Realtors or some mortgage broker advocacy group such as CoreLogic without looking for the spin.