Foreclosure Starts At 10 Year Low

foreclosure_startsAccording to the Midyear 2015 U.S. Foreclosure Market Report™, which shows a total of 597,589 U.S. properties with foreclosure filings—default notices, scheduled auctions and bank repossessions—in the first half of 2015, down 13 percent from the previous six months and down 3 percent from the same time period in 2014.

A total of 304,439 U.S. properties started the foreclosure process in the first half of the year, down 4 percent from a year ago and 18 percent below foreclosure starts in the first half of 2006 before the housing price bubble burst in August 2006. First-half foreclosure starts 2015 were at their lowest level in any year since tracking began in 2006—a 10-year low.

U.S. foreclosure starts have not only returned to pre-housing crisis levels, they have fallen well below those pre-crisis levels and are still searching for a floor, down 4 percent from a year ago. Loans originated in the last five years continue to perform better than historic norms, with tighter lending standards and more cautious borrower behavior acting as important guardrails for the real estate boom of the past three years.

There were 19 states where foreclosure starts in the first half of 2015 were at or below their pre-crisis levels of 2006, including California, Florida, Arizona, Georgia and Illinois.

Bank repossessions still 37 percent above pre-crisis levels

A total of 209,281 U.S. properties were repossessed by lenders in first half of 2015, up 20 percent from a year ago and 37 percent above the number of bank repossessions (REOs) in the first half of 2006 before the housing bubble burst.

Less-disciplined loans originated during the last housing boom continue to account for the majority of distress still hanging over the housing market, with two-thirds of all loans in foreclosure on loans originated between 2004 and 2008. An increasing number of these failed bubble-era loans finally exited the foreclosure process in the first half of 2015, resulting in accelerating bank repossessions that are still well above pre-crisis levels along with record-long average foreclosure timelines for properties foreclosed in the second quarter.

First-half bank repossessions in 2015 were above 2006 levels in 35 states, including California, Florida, Arizona, Illinois and Nevada.

Florida, New Jersey, Maryland post highest foreclosure rates in first half of 2015

Florida foreclosure activity in the first half of 2015 decreased 22 percent from a year ago, but the state still posted the nation’s highest foreclosure rate: 1.06 percent of housing units (one in every 95) with a foreclosure filing during the six-month period.

New Jersey foreclosure activity in the first half of 2015 increased 24 percent from a year ago, boosting the state’s foreclosure rate to second highest nationwide: 0.92 percent of housing units (one in every 109) with a foreclosure filing during the six-month period.

Maryland’s foreclosure rate was almost identical to the New Jersey foreclosure rate, but was slightly lower and ranked No. 3 highest among the states despite a 1 percent year-over-year decrease in foreclosure activity.

Nevada foreclosure activity in the first half of 2015 increased 10 percent from a year ago, and the state’s foreclosure rate — 0.79 percent of housing units (one in every 126) with a foreclosure filing — ranked fourth highest among the states, while the Illinois foreclosure rate—0.74 percent of housing units (one in every 135) with a foreclosure filing — ranked fifth highest despite a 9 percent year-over-year decrease in foreclosure activity in the first six months of 2015.

Other states with foreclosure rates ranking among the top 10 highest in the first half of 2015 were Delaware (0.61 percent of housing units with a foreclosure filing), Ohio (0.58 percent), Indiana (0.54 percent), South Carolina (0.54 percent), and Tennessee (0.53 percent).

Atlantic City posts top metro foreclosure rate in first half of 2015

With 1.70 percent of housing units (one in every 59) with a foreclosure filing in the first half of 2015, Atlantic City, N.J., posted the nation’s highest foreclosure rate among metropolitan statistical areas with a population of 200,000 or more.

Eight Florida cities posted first-half foreclosure rates among the 10 highest: Tampa at No. 2 (1.22 percent of housing units with a foreclosure filing); Lakeland at No. 3 (1.21 percent); Jacksonville at No. 4 (1.20 percent); Ocala at No. 5 (1.18 percent); Miami at No. 6 (1.15 percent); Orlando at No. 8 (1.07 percent); Deltona-Daytona-Beach-Ormond Beach at No. 9 (1.05 percent); and Crestview-Fort Walton Beach-Destin at No. 10 (0.97 percent).

Rockford, Ill. posted the nation’s seventh highest metro foreclosure rate: 1.14 percent of housing units (one in every 87) with a foreclosure filing in the first six months of 2015.

Eight of nation’s 20 largest metro areas post annual increases in foreclosure activity

Eight of the nation’s 20 largest metro areas posted a year-over-year increase in foreclosure activity in the first half of 2015 compared to a year ago: Boston (up 29 percent), St. Louis (up 25 percent), New York (up 24 percent), Houston (up 19 percent), Dallas (up 19 percent), Detroit (up 13 percent), Philadelphia (up 8 percent), and Baltimore (up 5 percent).

Among the nation’s 20 largest metro areas, those posting the biggest decreases in foreclosure activity in the first half of 2015 compared to a year ago were Miami (down 30 percent), Riverside-San Bernardino in Southern California (down 15 percent), Seattle (down 14 percent), Los Angeles (down 14 percent), and Phoenix (down 14 percent).

States with the biggest increase in foreclosure activity in the first half of the year compared to a year ago included Massachusetts (up 43 percent), New York (up 31 percent), New Jersey (up 24 percent), Texas (up 21 percent), and Michigan (up 17 percent).

Average foreclosure timelines hit new highs for homes foreclosed in second quarter

Foreclosures completed in the second quarter of 2015 took an average of 629 days from the first public notice of foreclosure to complete the foreclosure process, the longest average time to foreclose since RealtyTrac began tracking in the first quarter of 2007.

States with the longest foreclosure timelines were New Jersey (1,206), Hawaii (1,060), Montana (1,028), New York (1,000), and Florida (989).

States with the shortest foreclosure timelines were South Dakota (177), North Carolina (198), Virginia (229), Wyoming (242), and Alabama (244).

U.S. foreclosure activity up from year ago for fourth consecutive month in June

There were a total of 117,055 U.S. properties with foreclosure filings in June, down 8 percent from a 19-month high in May but still up 9 percent from a year ago — the fourth consecutive month with a year-over-year increase.

A total of 49,105 U.S. properties started the foreclosure process for the first time in June, down 4 percent from the previous month but up 4 percent from a year ago. Despite the year-over-year increase, June foreclosure starts were still below their pre-crisis average of 52,000 a month in 2005 and 2006.

States with the biggest increase in foreclosure starts in June compared to a year ago included Massachusetts (up 141 percent), Colorado (up 83 percent), New York (up 45 percent), Virginia (up 41 percent), Texas (up 37 percent), Nevada (up 28 percent), Indiana (up 21 percent), Missouri (up 21 percent), and New Jersey (up 19 percent).

Lenders repossessed 36,503 U.S. properties in June, down 19 percent from the previous month but still up 36 percent from a year ago—the fourth consecutive month with a year-over-year increase in REOs and above the pre-crisis average of 23,000 a month in 2005 and 2006.

States with the biggest increase in REOs in June compared to a year ago included New Jersey (up 275 percent), Oregon (up 198 percent), New York (up 142 percent), Massachusetts (up 109 percent), Texas (up 84 percent), Nevada (up 78 percent), and Michigan (up 64 percent).

Repost: Pending Home Sales Spike to Highest Level in Nine Years

pending_sales_spikePending home sales rose in April for the fourth straight month and reached their highest level in nine years, according to the National Association of REALTORS®. Led by the Northeast and Midwest, all four major regions saw increases in April. The Pending Home Sales Index,a forward-looking indicator based on contract signings, increased 3.4 percent to 112.4 in April from a slight upward revision of 108.7 in March and is now 14.0 percent above April 2014 (98.6)—the largest annual increase since September 2012 (15.1 percent). The index has now increased year-over-year for eight consecutive months and is at its highest level since May 2006 (112.5).

Lawrence Yun, NAR chief economist, says the steady gains in contract activity each month this year highlight the fact that buyer demand is strong. “REALTORS® are saying foot traffic remains elevated this spring despite limited—and in some cases severe—inventory shortages in many metro areas,” he says. “Homeowners looking to sell this spring appear to be in the driver’s seat, as there are more buyers competing for a limited number of homes available for sale.”

Adds Yun, “As a result, home prices are up and accelerating in many markets.”

“The only time since then that we’ve come close to this level of home contracts written was in April 2010 when the new home tax credit expired—part of the stimulus program,” says realtor.com® Chief Economist, Jonathan Smoke. “This level of demand is no surprise to us. Our realtor.com® activity this spring has been predicting strong sales. And we are seeing the trend continue solidly into May.”

Following April’s decline in existing-home sales, Yun expects a rebound heading into the summer, but the likelihood of meaningful gains will depend on a much-needed boost in inventory and evidence of moderating price growth now that interest rates have started to rise.

“The housing market can handle interest rates well above 4 percent as long as inventory improves to slow price growth and underwriting standards ease to normal levels so that qualified buyers—especially first-time buyers—are able to obtain a mortgage,” says Yun.

After falling four straight months, the PHSI in the Northeast bounced back solidly (10.1 percent) to 88.3 in April, and is now 9.4 percent above a year ago. In the Midwest the index increased 5.0 percent to 113.0 in April, and is 13.3 percent above April 2014.

Pending home sales in the South rose 2.3 percent to an index of 129.4 in April and are 14.8 percent above last April. The index in the West inched 0.1 percent in April to 103.8, and is 16.4 percent above a year ago.

Total existing-home sales in 2015 are forecast to be around 5.24 million, an increase of 6.1 percent from 2014. The national median existing-home price for all of this year is expected to increase around 6.7 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.

“Sales would be even higher if inventory was growing as quickly as demand, but instead we’ve had 32 straight months of the supply of existing homes on the market under six months,” comments Smoke. “That’s why we’re seeing higher levels of price appreciation this year. That higher level of price appreciation is encouraging more people to consider buying and/or selling and levels of reported foot traffic by REALTORS® reinforce that. All this bodes well for continued momentum into May and June.”

For more information, visit www.realtor.org.

More than Half of Underwater Homeowners Are Nowhere Near Re-Surfacing

The U.S. negative equity rate is dropping, but more than 4 million U.S. homeowners owe the bank at least 20 percent more than their homes are worth.

That means those homes would have to appreciate at least 20 percent for their owners to have any chance of breaking even on a sale. Home values are forecast to continue rising, but at a slower pace than recent years.

The national negative equity rate dropped to 15.4 percent in the first quarter. A year ago, the rate was 18.8 percent. The rate of negative equity improved in all of the 35 largest housing markets in the first quarter of 2015, a sign that, metro-by-metro and home-by-home, the country is continuing to recover from the lax lending rules and subsequent housing market bust of the last decade.

At the peak of the real estate crisis, more than 15 million homeowners owed more on their mortgages than their homes were worth, putting them in negative equity. Foreclosures, short sales and rapidly rising home values freed nearly half of those homeowners, leaving 7.9 million homeowners upside down at the end of Q1 2015. Homeowners who remain underwater will likely be the toughest to free from negative equity.

Spring and summer are the busiest buying and selling seasons, and this year, there is high demand for homes in the bottom third of the market. However, a disproportionate number of those homeowners are simply stuck in their homes and can’t afford to sell to buyers looking for homes in their price range.

The rate of underwater homeowners is much higher among the homes with the least value. More than 25 percent of those who own the least valuable third of homes were upside down, compared to about 8 percent of the most valuable third of homes.

The imbalance is even more pronounced in some markets. In Atlanta, for example, 46 percent of low-end homeowners were underwater, compared with 10 percent of high-end homeowners. In Baltimore, 32 percent of low-end homeowners were in negative equity, compared to 9 percent of those who own the highest-value homes.

It’s great news that the level of negative equity is falling, but what really worries me is the depth of negative equity. Millions of Americans are so far underwater, it’s likely they may not re-gain equity for up to a decade or more at these rates. And because negative equity is concentrated so heavily at the lower end, it throws a real wrench in the traditional housing market conveyor belt. Potential first-time buyers have difficulty finding affordable homes for sale because those homes are stuck in negative equity. And owners of those homes can’t move up the chain because they’re stuck underwater in the entry-level home they bought years ago. The logjam at the bottom is having ripple effects throughout the market, and as home value growth slows, it will be years before it gets cleared up. In the meantime, we’ll be left with volatile prices, limited inventory, tepid demand, elevated foreclosures and a whole lot of frustration.

Among the 35 largest housing markets, Las Vegas, Chicago and Atlanta had the highest rates of homeowners in negative equity. A smaller share of homeowners are upside down in Miami and Detroit, but homeowners there are more deeply underwater. In both places, over 60 percent of homeowners in negative equity were more than 20 percent underwater.