It has the makings of a riddle: Where can you find a place where sales of existing homes are both a buyer’s market and a seller’s market while still being an underperforming market compared to most everywhere else — all at the same time?

The answer: New Jersey. And underlying that answer in part is the relative peculiarity of how foreclosures work in this state.

Recent data indicates that the average price of a home in New Jersey is rising even while home sales in at least two counties — Monmouth and Ocean — are declining. So on one hand rising home values are good news for people who want to sell their homes. But on the other hand, the continued low interest rates available to borrowers makes it attractive for them to buy a home even when house values are going up.

Contributing to this seemingly contradictory situation of rising home prices and declining sales is the fact that in comparison to the rest of the country, the rate of what one might call troubled mortgages (that is, mortgages that are at least 90 days due or are already in foreclosure) are more than twice as high as the national average.

To make matters worse, in the second calendar quarter of this year new foreclosures in New Jersey were also more than double the average in the rest of the country. New Jersey is known as a one of a minority of states that uses the more burdensome “judiciary” method of foreclosure; it takes longer to clear houses through the foreclosure process here, which can mean that any given time more homes remain in foreclosure.

Thus, it seems that a high incidence of foreclosure, coupled with a struggling state economy, may keep home interest rates low, yet upward pressure on home prices despite the large numbers of homes in foreclosure means that home sellers are still seeing increased value in their properties.

Absent any changes in state law governing foreclosures or a more robust economic recovery, it appears that the best way to reduce the foreclosure rate is for homeowners to find ways to stay out of foreclosure. If working directly with mortgage lenders and servicing companies cannot achieve that objective for a homeowner, working with an attorney to explore various avenues of debt relief short of foreclosure may be another option to consider.

Source: Asbury Park Press, “NJ’s housing market wades through foreclosures,” Michael L. Diamond, Aug. 15, 2014