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Let’s take a look at the completed foreclosure situation and the overall – what everybody loves to call a shadow inventory situation. The mortgage metrics report from the government just came out, and we can see their completed foreclosures if we look at the last quarter. This just came out for the second quarter of 2012 completed foreclosures.

People can get really excited about that, saying, “Well, you know what? We’re over it. We’re past the foreclosures. We’re past the distressed properties.” But we have to hold on for a second, because the next graph is from the same exact report.This is the number of foreclosures in process.

So we can see that it dropped a little bit after stabilizing for the last couple of quarters, but there are still big numbers there. Those houses still have to be cleared. And you just turned around and said, “Well, if there’s less foreclosures, what’s happening with that?” First of all, let’s identify where this is going to have the biggest impact.

This gives us the highest foreclosure inventory by state. And we can see that a lot of it is up in the Northeast. That’s why those red states are red, and why they’ll probably continue to be red in those regions for the next several quarters.

Illinois is getting through their distressed property pretty quickly right now, but they still have high numbers, so it’s still impacting them. Florida, depending on where you are in the state, some of that inventory is being cleared out pretty quickly. Other parts of Florida not so much; that state’s still red. Nevada, as I’ve explained before, is a little bit of an anomaly, because they passed a state law last October saying if someone foreclosed on someone improperly, they weren’t penalized. It wasn’t a dollar penalty; it was a felony. They were going to throw them in jail! Obviously a lot of people backed off from foreclosing on people after that law was passed. But they’re rewriting that law a little bit and taking a little bit of the teeth out of it so people will start clearing those foreclosures in Nevada, because there’s certain areas of Nevada that very much need that inventory. and I think Nevada will turn into a gray state before too long. But the red states are the judicial states that have the biggest backlog of inventory. They’re going to be impacted the most.

But there is good news! I don’t think they’re going to get get impacted the way the first wave of foreclosures in 2007 impacted the market. Things are more different now. Number one is we know how to handle things a lot better than we did back then. It’s going to come as a surprise to the red states right now.