Tennessee is seeing declines in its foreclosures and has stable unemployment. However, it has a ways to go before its housing market sees improvement.

Foreclosures Decline

According to a July report by RealtyTrac, the state of Tennessee saw foreclosures fall dramatically as compared to July 2010. The 2,591 foreclosure filings represent a 34 percent drop, and they included default notices, bank repossessions and scheduled foreclosure actions. Looking at the rates from month-to-month basis, July filings dropped 11.5 percent from June. National numbers for foreclosures also dropped 35 percent in July. When compared to foreclosure rates of other states in the country, Tennessee is in the middle of the pack at number 25.

In Tennessee, the declines in foreclosures started with issues with banks robo-signing mortgages beginning in October of 2010. This caused Tennessee real estate ownedmortgages to go through foreclosure at a slower pace, according to RealtyTrac. These delays, along with efforts both nationally and statewide to prevent foreclosures, enabled homeowners to put off going through a foreclosure.

The foreclosure drops seem to be coming from short-term solutions rather than strong housing recovery for the Tennessee market. Problems are forecasted to continue through 2012. For a recovery to take place in the housing market, improvements in the economy and the job market will need to occur.

Stable Unemployment

In July, the unemployment rate for Tennessee remained at 9.8 percent, identical to the number reported in June. With the consistent unemployment rate, statistics showed a small decline in employment numbers and a drop in the labor force, according to a report by the Tennessee Labor and Workforce Development.

Tennessee's July unemployment numbers came in higher than the national number of 9.1 percent and the revised June number of 9.2 percent. From a survey of Tennessee households, the employment numbers dropped by 12,200 people from June to July, and 15,100 fell from the civilian labor force ranks, representing workers who have ceased seeking employment.

On a positive note, the survey disclosed an increase of 1.3 percent through the year for private employment. Another growth area was the manufacturing of durable goods and construction.

Tennessee's Bright spot – Nashville

This spring, the state capital of Nashville saw a decline of up to 35 percent in housing inventory and a change in its marketplace during the last eight months, according to the Market Graphics Research Group. Nashville has seen the construction of 890 homes in the second quarter, representing a 37.5 percent increase from the first quarter of 2011.

These numbers were stronger than expected, and as home inventories continue to decline, growth will help drive a demand for new homes, noted Metrostudy. However, there is uncertainty in consumer confidence, and homebuyers' capacity to borrow and secure jobs.

Home prices

Looking at the median home prices, single-family houses in the middle of the state, which includes Nashville, have seen lower numbers than the previous year. However, local real estate agents believe there are deals on the way and prices are stable for this region.

When looking at median home prices for Chattanooga, which is number four in population for the state, housing values have decreased since the housing market crashed in 2007 to prices of $124,400, which have not been seen in a decade. July 2011 prices have risen to an average of $142,145.

The July median prices for Chattanooga were lower than home prices in 2000, which averaged at $132,000 (adjusted for inflation). They are greater than the $20,000-decrease from the 2006 market peak when the city saw a median $153,000 home price (also adjusted for inflation).

Tennessee has some encouraging numbers for its housing market, but it is not fully in recovery mode yet.