Update: I want to note that nationally, foreclosure rates are up, like really up. “This is really the first time we’ve seen a significant increase in the number of new foreclosure actions,” said Rick Sharga, a senior vice president at RealtyTrac, who tracks FC rates. “It’s still possible this is a blip, but I think it’s much more likely we’re seeing the beginning of a trend here.”

Roddy’s Foreclosure list is out and it looks like good news for North Texas: Dallas-Fort Worth area foreclosure postings for the October auction dropped 17 percent year-over-year to 4,177 homes, according to data compiled by Addison-based Foreclosure Listing Service Inc   Compared with last month, the Oct. 4 auction will have 13 percent fewer foreclosure postings, according to George Roddy, Sr..

It’s still not Miller Time.

“Without a doubt, this is good news,” said George Roddy Sr., president of Foreclosure Listing Service. “But, I am still very guarded about the foreclosure market. And, due to my concerns, I am not celebrating a turnaround yet.”

Dallas County’s foreclosure listings dropped 17 percent to 1,741 homes. Collin County’s foreclosure listings fell 22 percent to 570 homes. Denton County and Tarrant County’s foreclosure rate decreased 20 percent, and 14 percent, respectively. And even though postings are coming down, consider this: in 2000 only 1049 Dallas area homes were posted for foreclosure; activity is now 300% higher.

So Roddy has several reasons for being cautious: there are an estimated 700,000 U.S. homes in repo that remain in what we call “shadow inventory” —  that is, will likely be put up for foreclosure. Ever since the Robo-signing fiasco (banks expediting foreclosures not quite legally) banks are slowing down the process, dotting i’s and crossing t’s, which means they will just be foreclosing more, longer. Those pups have not even hit the market.

“At September’s foreclosure auctions in the D/FW Metro, almost 120 properties were bid on and successfully purchased by third-party buyers at the auctions, ” says Roddy. “Those buying postings based on mortgage delinquencies paid on the high-side $0.77 (77 cents) per dollar down to as low as $0.19 (19 cents) on the dollar based on the assessed value of the property.”

Like someone who snagged a $102,000 home for $19,000.

If lenders were to avalanche the market with all these foreclosures, it would drag down the regular market, negatively impacting home values.

And that could happen, if Washington pressures the banks to write down all the bad loans. As you will hear from me over and over again ad nauseam: bank profits are up by 135% while their lending is down by at least 9%.

Purging the system of those bad loans would be painful immediately (to the banks!), but bring about a closure of sorts to the market.

May be a little crude, but it’s kind of like this: do you want to take the laxative now or be miserable for three years?