Foreclosures Hit Five-Year Low
Foreclosures hit a five-year low
12:05AM EDT October 11. 2012 –
Foreclosure activity hit a five-year-low in September, further lessening fears that lenders might flood markets with foreclosed homes and curtail price gains.
Market researcher RealtyTrac reports today that 180,427 properties received foreclosure filings in September, down 16% from a year ago.
Foreclosure activity has been dropping for nine consecutive quarters. There were expectations it would pick up this year following a mortgage servicing settlement earlier this year between big lenders and federal and state officials.
That hasn’t happened. Instead, home prices have been rising, up 4.6% in August from a year ago, CoreLogic says.
“We’ve been waiting for the other foreclosure shoe to drop,” says Daren Blomquist, RealtyTrac vice president. Instead, it’s “being carefully lowered to the floor.”
Foreclosure activity has been dropping for numerous reasons, including:
— An improving economy. Nationwide, almost 7% of U.S. home loans in August were 30 or more days delinquent but were not in foreclosure. That’s down almost 11% from a year ago, says mortgage tracker Lender Processing Services.
— More short sales. Short sales occur when lenders agree to a home sale for less than what’s owed on the property. In the first five months of this year, short sales were up 18% from last year, RealtyTrac data show. In some states, they were up much more. California saw a 39% year-over-year jump in short sales that occurred before the first foreclosure filing went out.
— More restrictions. Nevada, Oregon and California have passed legislation in the past year that require lenders to take more steps to foreclose, RealtyTrac notes. Georgia, too, is requiring lenders to put more information on foreclosure notices. Such measures may be slowing the foreclosure process in those states, Blomquist says.
Foreclosure filings include default notices sent to homeowners, scheduled auctions and bank repossessions of homes.
Despite the national slowdown in foreclosure activity, not all states are clearing markets of distressed properties at the same pace.
In about two dozen states where foreclosures go through the courts, including New Jersey and New York, there are still far more distressed homes, LPS data shows.
In August, 6.5% of homes in judicial foreclosure states were in the foreclosure process, vs. 2.3% of homes in states where courts are not involved in foreclosures, LPS says. California and Arizona are non-judicial foreclosure states.
The longer distressed homes make up a substantial part of a market, the longer they’ll weigh on home prices, says Trulia economist Jed Kolko.
Judicial states such as Florida, New York, New Jersey and Illinois “still have a lot of foreclosures ahead of them,” Kolko says. Meanwhile, California, Arizona and Nevada “have much of their foreclosure pain behind them.”
Some judicial states are moving faster on foreclosure activity. In the third quarter, RealtyTrac noted substantial increases for New Jersey, New York and Indiana. Florida also posted increases.