The number of Treasure Valley homes entering the foreclosure process in May was down 17 percent from the previous month, according to statistics released Wednesday.
A total of 345 notices of default - the first step in the foreclosure process - were filed in Ada and Canyon counties in May, compared with a yearlong peak of 415 in April.
However, experts think the drop in foreclosures may be short-lived and it may not do much to erase the public's perception of a Treasure Valley single-family residential market that has been in a slump since July 2006.
The foreclosure numbers could turn upward again as an increasing number of adjustable-rate mortgages start to reset this year, said Charlie Nate, president of IdahoDataProviders, which compiled the statistics.
Nate's company, which tracks daily foreclosure filings statewide, reported 232 notices of default were filed in Ada County last month, an 11 percent drop from 261 in April. The 113 notices filed in Canyon County in May was down 26 percent from the 154 filing a month earlier.
The 345 filings were still 141 percent ahead of the 143 default notices filed in May 2007.
Moreover, the Valleywide total of 1,843 default notices filed between January and May of this year represents a 139 percent increase over the comparable period a year ago.
The decline in default filings is not likely to continue for long, Nate said.
He said the lull in May was because banks are being swamped with repossessed properties. As a result, he said, lenders have become reluctant to pull the trigger on a foreclosure, choosing instead to try to negotiate a "short sale," a process in which lenders take less than originally loaned on a property in order to avoid having to repossess the home.
Nate noted that while foreclosure filings were down in May, the number of short sales listed on the Intermountain Multiple Listing Service rose to 720 from 630 in April, a 14 percent increase.
"Lenders are more likely to go along with a short sale now," Nate said.
"They already have a ton of properties on their books. So, they might wait (on foreclosure) to see if they can get a short sale approved."
Nate said foreclosures in the Valley could start rising again as possible short sales fall through and more subprime mortgages begin to reset.
Some mortgages use an initially low interest rate to lure in a homebuyer. After a period of time the loan's variable interest rate adjusts upward. In the past, homeowners could refinance at lower rate based on the increased value of their home.
In the current real estate market, many property owners are "upside down," or owing more than their home is worth and can't refinance, Nate said.
"I think two out of every three homes in foreclosure are upside down," he said.
Shaun Tracy, an associate Realtor with Re/Max Capital City in Boise, said the decline in foreclosures last month isn't necessarily a sign that the local real estate market is turning around.
"I'm not sure that the public is really aware just how many foreclosures there really are out there," Tracy said.
But it may convince consumers sitting on the fence that home prices will not fall any farther and that this is the time to buy a home, Tracy said.
Joe Estrella: 377-6465
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