Is The Foreclosure Rate Unrelated To The Housing Bubble And Close To Long Term Trend

Part of a comment I posted on "The Breakdown of the U.S. Mortgage Market" on Rortybomb:

Chart from Rortybomb.

Additionally and interestingly, the Mortgage Bankers Association chart shows an upward trend in mortgage foreclosures from 1979 to 2002. Defaults appear to be about 5 times greater in 2002 than in 1979.

The foreclosure drop from 2002 to 2006 can be attributed to the housing bubble price appreciation, which allowed homeowners to avoid foreclosure by selling their homes at a price that paid off the mortgage and other second lien debt.
If the home bubble had not occurred we might have seen a foreclosure rate of about 2 to 2.5 percent now, based on an eyeball estimate of the upward slope of the chart.

The high rate of current foreclosures may only be slightly higher than the expected trend line and the bubble allowed avoidance of trend line foreclosures from 2002 to 2006.

The current foreclosure rate may seem high because the housing bubble artificially allowed the foreclosure rate to deviate from the trend line and suppress it, but it may be close to trend now.

The economic and social factors that raised the foreclosure rate from 1979 to 2002 probably are an important force in today’s foreclosures and the collapse of the housing bubble and the higher than norm unemployment maybe less of a cause than common consensus believes.