As reported by RIS Media on July 31, Realtytrac has released its 2006 second quarter Foreclosure Market Report. Nationally, the report showed during the second quarter foreclosures fell 16% when compared to the first quarter of 2006 and increased 25% when compared with the second quarter of 2005. In California, the report showed that during the second quarter foreclosures fell 7% from the first quarter of 2006 and increased 100% from the second quarter of 2005.

It is worth noting that presently foreclosures are not above their historic mean and employment remains high.

Does this mean that we have returned to a normal foreclosure market? Or does it mean that as adjustable rate mortgages are reset in the current market of higher rates foreclosures are increasing?

As long as employment stays high then the statistic to watch is the ratio of foreclosures in adjustable rate mortgages versus the foreclosures in fixed rate mortgages. If this ratio increases foreclosures may increase above the normal trend due to excessive and possible undisciplined use of adjustable rate mortgages.