CNBC’s The Street reported here that foreclosure rates in the United States dropped 30% for the first quarter of 2012 as compared to the same time last year; this despite the fact that there was an overall 8.1% increase this past March. While this is good news for the average homeowner, it has the analysts completely flummoxed.

According to the CNBC report “analysts had expected this number to skyrocket immediately following the $25 billion settlement between banks and state governments over fraudulent mortgage servicing.”

As the thinking goes, as soon as the banks got the settlement out of the way they were expected to continue to aggressively go after distressed homeowners like hungry lions who hadn’t eaten in a week. Now analysts don’t know what to make of the news of an overall 30% drop.

Even more surprising was the fact that the drop in foreclosure rates was steepest in states known as “non-judicial” states. In these states a judge is not required to oversee the foreclosure process, giving great latitude to the various parties involved. CNBC further points out that most of the decline is tied to private and portfolio loans, backing up the long-held assertion by banks that the majority of their alleged fraud problems stem from loans re-packaged and re-sold so many times no one knows who owns them.

At the same time foreclosure rates have been declining short sales have been on the increase. Statistics show a 15% increase for the final quarter of 2011 while REO sales (traditional sales of bank-owned homes) declined by 12%. Both of these statistics suggest that banks are trying to avoid completing foreclosure, preferring to approve a short sale rather than having to become owners of more distressed properties.

“”Lenders are increasingly recognizing that short sales may be a better alternative for them than foreclosure,” RealtyTrac’s Daren Blomquist told CNBC. “This trend began in markets with stronger demand and where the distressed inventory tends to be newer homes (Phoenix, Los Angeles, Las Vegas), but the trend appears to be spreading to other markets like Atlanta and Detroit.”

All Just Speculation

If nothing else, the CNBC story serves as a great reminder of the fact that analysts usually engage in routine speculation and nothing more. There is a place for such speculation, don’t misunderstand, but it must be taken for what it is. Analysts often get things wrong because they tend to fail to look at the big picture.

As an example, the same thing occurs with unemployment numbers. Month after month, when the U.S. economy doesn’t see significant growth, analysts are surprised to hear the government’s jobs numbers. Yet if they looked at the entire economy as a whole, including taxes and regulation, they probably wouldn’t be surprised. Their predictions would probably be more accurate as well.

In the real estate market it’s easy to speculate about where foreclosures are going and when the crisis will eventually come to an end. But in reality, no one knows. All we know is that there are a lot of homes currently under water with owners trying to find any way out they can. If banks are willing to settle for short sales in order to avoid foreclosure, that’s a good thing.