Drop in foreclosure rate "heroic" on part of Americans, expert says

(CBS News) Home foreclosures dropped 31 percent last month, from the same time a year ago, new numbers released from the foreclosure listing firm RealtyTrac Inc show. But more importantly, 2013 is shaping up to have the lowest foreclosure rate in six years.

It's part of a broader trend economists call "deleveraging," in which debt is paid down by selling assets, Jon Hilsenrath, chief economics reporter for The Wall Street Journal, explained on "CBS This Morning." He called the numbers "very significant," adding, "Americans have done something heroic, really, in the last five years. Faced with all of this debt after the housing boom, they've made a lot of progress on paying it down. Almost one-eighth of the household consumer debt got basically paid down or written off by banks in the last five years and we're seeing that in foreclosure rates ... the rate of [banks] repossessing homes is coming down because household finances are in better shape than they were a few years ago."

However, nearly one in five homes with mortgages are still considered "underwater," and in some states there's an increase in foreclosure stats, such as Maryland in which the rate is up 275 percent, "CTM" co-host Norah O'Donnell pointed out, based on information provided by RealtyTrac Inc.

The states with the highest foreclosure rates, according to RealtyTrac, include Florida, Maryland, Ohio, New Mexico, Illinois, Nevada, Georgia, South Carolina, and Utah.

Different parts of the country will progress and regress at different rates, Hilsenrath said. "What's interesting to me about the increase is we're seeing a lot of them in the northeast. New Jersey, New York, Connecticut. So, it looks like that part of the United States is not doing as well in this recovery and in repairing household finances."

Though this year is a bright spot in the housing recovery, Hilsenrath said the next step is whether there will be a follow-through in the larger economy. He said, "The stage of the story (is) that Americans have repaired their finances. Are they going to start spending money? There's this idea of the paradox of thrift. The idea that we're seeing this from the households is they're not spending a lot of money, so the economy is growing very slowly. So the big question right now is, do people start feeling better about their finances to start spending a little bit and getting the economy growing faster and creating more jobs? That's really what we have to start seeing next -- a faster growing economy, more job growth. That's what will keep this recovery going."

For more, watch Hilsenrath's full "CTM" analysis above.