Story first appeared on USA Today -
Many states with faster foreclosure processes are seeing sharper increases in home prices than states where foreclosures take longer to get done.
There are exceptions, and other factors — such as job growth — are likely stronger drivers of home price trends, economists say.
But home price data generally show stronger price increases in states where courts don't have to approve foreclosures than in states where they do. Foreclosures are completed faster where court approval isn't necessary.
Last year, home values tracked by Zillow, a web-based real estate tracker, rose an average 5.4% in the 24 states where foreclosures don't go through the courts, according to Zillow. Where they do, the average increase was 3.2%.
Asking prices, a leading indicator of price trends, show a similar pattern.
In January, asking prices in non-judicial states were up an average of 7.3% year-over-year vs. 3.1% for judicial foreclosure states, show data from real estate website Trulia.
Non-judicial foreclosure states have tended to clear out distressed home inventory quicker, which is helping prices, says John Burns, CEO of John Burns Real Estate Consulting. Its home price analysis shows that the 10 major metropolitan areas that have seen the most rapid appreciation in the past year are in non-judicial foreclosure states.
Job growth and how far prices dropped during the housing bust are probably stronger drivers of home price trends, says Trulia economist Jed Kolko. But foreclosure speeds are a contributing factor, he and others say.
In Florida, New York and New Jersey — all judicial foreclosure states — the average loan in foreclosure was past due for more than 31 months before the process was completed, according to December data from Lender Processing Services.
In California, Arizona and Nevada — all non-judicial foreclosure states — that average was fewer than 22 months, LPS data show.
Those three states were among the top seven in terms of home value gains last year, Zillow's data show.
Homes lingering in foreclosure "creates real uncertainty," which hurts prices, and inhibits investor buyers, says Stan Humphries, Zillow's chief economist.
Investors have played a big role in driving prices higher in Arizona, Nevada and California, he adds.
As of December, 10% of Florida's home loans were still in some stage of foreclosure, the highest percentage in the nation. Behind it were New Jersey, at 7%, and New York, at 5%, according to CoreLogic.
The overhang of distressed homes in the market "is absolutely contributing" to smaller price gains in judicial foreclosure states, says Mike Fratantoni, economist with the Mortgage Bankers Association.
Florida home values, up 6.4% last year, bested the national rise of 5.9%, Zillow's data show. But values rose less than 1% last year in New York and New Jersey, Zillow says.
Florida values would probably have risen more last year if more of its foreclosures were behind it, says Kolko.
That's because Florida, like Arizona, California and Nevada, saw home prices fall more than 40% from its peak before the housing bust. It's also a market that attracts investor and second-home buyers.
Exceptions to the trends in price gains between judicial and non-judicial foreclosure states underscore that many factors influence home values, Kolko says.
For instance, Zillow's data show strong price gains last year in Indiana, a judicial state. On the other hand, Rhode Island had the greatest price depreciation last year, the data show, and it's a non-judicial state.
Burns' data show that five of the top 20 housing markets for price gains were cities with full or partial court oversight of foreclosures, including Washington, D.C., New York and Miami.