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Foreclosure Activity Slows: Is This Really a ‘Good’ Thing?

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The number of housing foreclosures are falling. There were slightly more than 225,000 foreclosure proceedings in February, down 14% compared to January, and an even more impressive 27% drop vs. a year ago, according to RealtyTrac.

Good news for struggling homeowners, as more of you are staying in your home. However, this doesn't mean the housing market has turned the corner.  The decrease in foreclosure activity, RealtyTrac says, is likely due to a slowdown in filings because of various lawsuits regarding improper foreclosures by the banking industry.  If anything, the legal holdups are probably just dragging out the process and will prolong any real estate resurgence.

The housing market remains troubled.  December's S&P/Case-Shiller Index showed a drop in home values across the board. Like Case-Shiller, RealyTrac's data shows the hardest hit areas are still suffering. Foreclosure activity is still highest in Nevada, Arizona and California.

The solution according to Aaron and Henry is to let nature takes its course.  The Obama administration's mortgage modification plan is having little lasting effect.  The principle reduction ideas being floated may help existing homeowners and may aid banks somewhat, but they likely keep prices inflated and dissuade those on the sidelines from buying. (See:
"Pretty Ham-Fisted": Glenn Hubbard Reviews Obama's Newest Housing Fix)

What's the best solution?