RealtyTrac (www.realtytrac.com) reports that foreclosures rose 9% from April to May 2012 but were down 4% compared to May 2011. Overall foreclosure filings — defaults, scheduled auctions and bank repossessions — numbered 206,000 or one in every 639 homes in the US for the month of May. The process of working down the inventory continues.
Commenting on the report, Brandon Moore, CEO of RealtyTrac, said “U.S. foreclosure activity has now decreased on a year-over-basis for 20 straight months including May, but the jump in May foreclosure starts shows that it’s going to be a bumpy ride down to the bottom of this foreclosure cycle. Based on the rise in pre-foreclosure sales we’ve seen so far this year, a higher percentage of these new foreclosure starts will likely end up as short sales or auction sales to third parties rather than bank repossessions going forward. While pre-foreclosure sales have less of a negative impact on home values than bank-owned sales, they still represent a discounted sale where a distressed homeowner is losing his or her home.
“Disposing of distressed homes by pre-foreclosure sale can also benefit lenders and servicers because pre-foreclosure homes sell at a higher average price point than bank-owned homes,” Moore continued. “Our first quarter foreclosure sales report showed that the average price of a pre-foreclosure home was more than $27,000 higher than the average price of a bank-owned home — which quickly adds up given that there have been an average of 1.6 million nationwide foreclosure starts per year for the past five years. More banks are now recognizing that treating the problem of delinquent mortgages with short sales rather than bank repossessions can help them minimize their losses and also avoid taking on more REOs, which they then have to manage, maintain and market for sale.”
The patterns differ across the country. Georgia jumped to be the state with the most foreclosures followed by Arizona, Florida, California and Nevada. The recent results for Atlanta in the S&P/Case-Shiller Home Price Indices foreshadowed Georgia’s foreclosure figures.
Looking forward the two big issues for housing are mortgage availability for first time buyers and working down foreclosures.