Beyond the economy and the consumer confidence affected by the economy, possibly the biggest factor at play in the real estate market's ability to return to traditional appreciation levels is the foreclosure inventory and backlog.

Simply put, clearing out the inventory of foreclosure sales is vital to a full fledged real estate recovery. So, it has been promising to see the volume of foreclosure sales as a percentage of total sales spike as 2010 closed out and into the beginning of 2011. More promising is that prices have held rather flat in the Bellevue and Seattle area while existing foreclosure inventories have dropped. We have been making progress clearing out the inventory while mitigating the negative effect foreclosure place on home prices.

Nationally speaking, a portion of the progress can be attributed to the delay in foreclosures that resulted in the "robo-signing" mess… many new foreclosure starts were delayed while the larger banks ensured their processes were in order. A report out this month from foreclosure data firm RealtyTrac shows that foreclosure filings were 33% lower than a year ago, though they rose 7% from July to August, signaling a fresh batch of foreclosure may be on their way.

It is crucial to point out that those numbers are NATIONAL figures. Local numbers are even better. In King County, filings were down 24% month over month and 12.6% for Washington as a whole. Further, compared to last year, King County is down 51% and all of Washington State is down 53%. For King County, 1 in every 900 homes received a foreclosure filing in August; 1 in every 894 statewide. This is significantly better than the national rate of 1 in every 570 homes.

It is also important to point out that Washington is a "non-judicial" foreclosure state (foreclosures are processed without court intervention), meaning that foreclosures are a bit more automatic in layman's terms. I can't speak for the banks, but I have gotten the impression that much of the concern over their bank processes stemmed from "judicial" foreclosure states (where the foreclosure process is run through the court and homeowners often have a right of redemption following a foreclosure sale).

What I'm getting at, is that Washington may not have the foreclosure backlog that the national numbers suggest, and last month's numbers support that. Getting a grip on the "shadow inventory" of foreclosures is nearly impossible, so it will be important to continue monitoring the reports, but for now this slice of good news is certainly nice.

Ultimately, this is one more piece of evidence that a recovery is firmly grabbing hold. It also supports how local real estate brokers continue to notice that the market is behaving in a much more "normal" manner.

- Robert E. Wasser - Seattle and Bellevue real estate trends, market news, statistics, and blog