U.S. Foreclosure Activity Decreases 6 Percent in August Following Five Consecutive Months of Annual Increases

U.S. Foreclosure Activity Decreases 6 Percent in August Following Five Consecutive Months of Annual Increases

U.S. Foreclosure Activity Decreases 6 Percent in August Following Five Consecutive Months of Annual Increases

The FINANCIAL -- RealtyTrac on September 16 released its August 2015 U.S. Foreclosure Market Report, which shows a total of 109,561 U.S. properties with foreclosure filings — default notices, scheduled auctions and bank repossessions — in August, down 12 percent from the previous month and down 6 percent from a year ago. The 6 percent year-over-year decrease in August followed five consecutive months with year-over-year increases.

The report also shows one in every 1,205 U.S. housing units had a foreclosure filing in August.

“Foreclosure starts in August continued to search for a new floor below even pre-recession levels, indicating the housing recovery of the past three years is built on a solid financing foundation,” said Daren Blomquist, vice president at RealtyTrac. “But the continued rise in bank repossessions indicates more batches of bank-owned homes will be rippling through the housing market over the next three to 12 months as lenders list these properties for sale.

“This influx of bank-owned inventory may be good news for an inventory-challenged housing market, but buyers and investors interested in purchasing these bank-owned homes should understand they tend to be lower-value properties in areas where house values have not recovered as quickly and are more likely to have deferred maintenance issues that will need to be addressed,” Blomquist noted. “The average estimated market value of REO properties nationwide is now 33 percent below the average market value of non-distressed properties, and homes that were repossessed in the second quarter of this year on average had been languishing in the foreclosure process for 629 days.”

Foreclosure starts drop to lowest level since November 2005

A total of 45,072 U.S. properties started the foreclosure process for the first time in August, down 1 percent from previous month and down 19 percent from year ago to lowest level since November 2005. So far in 2015, foreclosure starts have averaged 49,362 per month, below the pre-crisis average of 52,279 per month in 2005 and 2006.

Foreclosure starts decreased from a year ago in 30 states, including California (down 29 percent from year ago), Florida (down 40 percent), New Jersey (down 38 percent), Texas (down 17 percent), and Maryland (down 26 percent).

Counter to the national trend, foreclosure starts increased from a year ago in 19 states, including New York (up 20 percent), Virginia (up 16 percent), Missouri (up 77 percent), and Massachusetts (up 61 percent) and Minnesota (up 20 percent).

Bank repossessions increase from a year ago in 36 states

There were a total of 36,792 U.S. properties repossessed by lenders through foreclosure (REO) in August, down 22 percent from previous month but still up 40 percent from a year ago, the sixth consecutive month with REOs increasing on a year-over-year basis. Bank repossessions in August were still well above their pre-crisis average of 23,119 per month in 2005 and 2006, but well below their peak of 102,134 in September 2010.

Bank repossessions increased from a year ago in 36 states, including Florida (up 23 percent), California (up 31 percent), Texas (up 168 percent), Ohio (up 35 percent), and New Jersey (up 295 percent).

“Foreclosure sales from the Trustee still require cash at the time of sale, so as a result lower-priced properties to mid-priced properties tend to sell for close to full value.  Higher-priced foreclosures, while rare, can sometime present an opportunity.  With stricter lender requirements we are most likely a few years away from foreclosures truly having an impact on home values in the area,” said Greg Smith, owner/broker at RE/MAX Alliance, covering the Denver market in Colorado where foreclosure activity was down 45 percent from a year ago.

Counter to the national trend, bank repossessions decreased from a year ago in 13 states, including Georgia (down 55 percent), Illinois (down 22 percent), Wisconsin (down 7 percent), Connecticut (down 36 percent), and Kentucky (down 45 percent).

Scheduled foreclosure auctions drop to nine-year low

A total of 41,308 U.S. properties were scheduled for a future foreclosure auction in August, down 14 percent from the previous month and down 19 percent from a year ago to the lowest level since May 2006 — a more than nine-year low. Scheduled foreclosure auctions in August were about one-fourth of their peak of 158,105 in March 2010 but still above their pre-crisis average of 33,634 a month in 2005 and 2006.

Despite the national decrease, scheduled foreclosure auctions increased from a year ago in 23 states, including New Jersey (up 38 percent), Pennsylvania (up 18 percent), New York (up 64 percent), South Carolina (up 38 percent), and Massachusetts (up 21 percent).

Nevada, Maryland, New Jersey post highest state foreclosure rates

Nevada foreclosure activity increased 4 percent from a year ago in August — driven largely by a 233 percent jump in bank repossessions — and the state posted the nation’s highest foreclosure rate for the first time since September 2014. One in every 507 Nevada housing units had a foreclosure filing in August, more than twice the national average.

Maryland foreclosure activity was unchanged from a year ago despite a 429 spike in bank repossessions, and the state posted the nation’s second highest foreclosure rate for the third month in a row. One in every 534 Maryland housing units had a foreclosure filing in August.

New Jersey foreclosure activity increased 3 percent from a year ago — driven largely by a 295 percent year-over-year increase in bank repossessions and 38 percent year-over-year increase in scheduled foreclosure auctions — and the state posted the nation’s third highest state foreclosure rate for the third month in a row. One in every 539 New Jersey housing units had a foreclosure filing in August.

Florida’s foreclosure rate dropped out of the top three highest among the states for the first time since June 2012 thanks in part to a 33 percent year-over-year decrease in foreclosure activity in August to the lowest level since April 2007.

South Carolina foreclosure activity increased 11 percent from a year ago in August, boosting the state’s foreclosure rate to fifth highest nationwide. One in every 863 South Carolina housing units had a foreclosure filing in August.

Other states with foreclosure rates ranking among the top 10 nationwide in August were Illinois at No. 6 (one in every 921 housing units with a foreclosure filing), North Carolina at No. 7 (one in every 970 housing units), New Mexico at No. 8 (one in every 1,005 housing units), Indiana at No. 8 (one in every 1,037 housing units), and Ohio at No. 10 (one in every 1,037 housing units).

10 of 20 largest U.S. metros post annual increase in foreclosure activity

Among the nation’s 20 largest metropolitan statistical areas by population, 10 posted year-over-year increases in overall foreclosure activity, led by St. Louis (up 140 percent), Boston (up 49 percent), Dallas-Fort Worth (up 26 percent), Minneapolis-St. Paul (up 26 percent), and New York (up 22 percent). Boston, Dallas-Fort Worth, and Minneapolis-St. Paul all continued to post foreclosure rates below the national average despite the increase in foreclosure activity.

Major markets with the biggest year-over-year decrease in foreclosure activity in August were led by Miami (down 37 percent), San Francisco (down 35 percent), Atlanta (down 28 percent), Tampa-St. Petersburg (down 23 percent), and San Diego (down 21 percent).

“Although the headline number appears to be worrisome, I believe that a majority of foreclosure activity is a function of banks finally starting to clear their backlogs,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market where foreclosure activity increased nearly 22 percent from a year ago.  “This is intuitive as prices in the Seattle region continue to rise which will offset some of their potential losses. Any addition to the stock of homes for sale is a positive as inventory in the Seattle region remains at historic lows.  I am sure that any bank owned properties that come to market will be snapped up quickly given the competitive market conditions in Seattle.”

Despite the decrease in foreclosure activity, Tampa-St. Petersburg posted the highest foreclosure rate among the nation’s 20 largest metro areas, with one in every 527 housing units with a foreclosure filing in August — more than twice the national average. Miami posted the second highest foreclosure rate among the 20 largest metro areas (one in every 568 housing units with a foreclosure filing), followed by Baltimore (one in every 586 housing units), Chicago (one in every 744 housing units), and Riverside-San Bernardino in Southern California (one in every 765 housing units).

“We saw a small increase in REOs into a strong market is positive. The market is easily absorbing them at higher prices and we are cleaning out the remnants from our ponderous judicial system. The continued decline in new filings indicates blue skies ahead,” said Mike Pappas, CEO and president of the Keyes Company covering the South Florida market.

New Jersey, Florida, Illinois, Nevada and North Carolina cities post top metro rates

Foreclosure activity decreased 5 percent from a year ago in August in Atlantic City, New Jersey, but the city still posted the nation’s highest foreclosure rate among metropolitan statistical areas with a population of 200,000 or more. One in every 307 Atlantic City housing units had a foreclosure filing in August, nearly four times the national average.

Another New Jersey city, Trenton, posted the second highest metro foreclosure rate — one in every 384 housing units with a foreclosure filing in August — followed by five Florida cities: Deltona-Daytona Beach-Ormond Beach at No. 3 (one in every 418 housing units with a foreclosure filing); Ocala at No. 4 (one in every 445 housing units); Jacksonville at No. 5 (one in every 462 housing units); Tampa-St. Petersburg at No. 6 (one in every 527 housing units); and Pensacola at No. 7 (one in every 541 housing units).

The three other cities with top 10 metro foreclosure rates in August were Rockford, Illinois at No. 8, Las Vegas at No. 9, and Fayetteville, North Carolina at No. 10 — all three with a foreclosure rate of one in every 565 housing units with a foreclosure filing.