RealtyTrac Expects Market Stabilization After Moratoria Wears Off

Improvements in foreclosure activity while temporary and expected to wear off before yearend may lead to some stabilization.

RealtyTrac February data show that in part due to processing moratoria, foreclosure activity decreased by 14% from the previous month and by 27% from February 2010 to a 36-month low.

Nonetheless RealtyTrac executives were quick to note that improvements are temporary. RealtyTrac’s chief executive James Saccacio said the monthly volume of properties receiving foreclosure filings may bounce back in several months but argued it “may never return” to its March 2010 peak of over 367,000 properties.

According to the RealtyTrac U.S. Foreclosure Market Report, the change in the number of default notices, scheduled auctions, foreclosure filings and bank repossessions marks “the biggest year-over-year decrease since RealtyTrac began issuing its report in 2005.”

All monitored categories hit 12-month lows with foreclosure filings reported on only 225,101 U.S. properties.

Saccacio said the main reason is that the mortgage servicing industry still is “in the midst of a major overhaul that has severely restricted its capacity to process foreclosures,” while the shorter month and the bad weather also affected it in a small part.

Despite decreases of 22% from January and 13% from February 2010 in foreclosure activity Nevada leads the nation featuring the highest state foreclosure rate for the 50th straight month in February as one in every 119 Nevada housing units had a filing.

Nevada, Arizona and California remain at the top of the state foreclosure rate, followed by Georgia, Michigan, Florida, Colorado and Hawaii.

Differences at the state level are significant as these states account for over 70% of the national total.
One of the indicators of future market stabilization may be the fact that local market differences vary considerably within state borders, even within the borders of the hardest hit states.

For example, for the second month in a row, Florida cities were missing from the foreclosure rates in the top 20 U.S. metropolitan areas with a population of 200,000 or more—which was not the case in 2010 when nine of the top 20 metro foreclosure rate cities were in Florida.

Lenders foreclosed on 64,643 U.S. properties in February, down 17% from January and 18% from February 2010.

Similarly, bank repossessions hit a 22-month low in February dropping by 37% from their peak of 102,134 in September 2010.

And the rate of REO growth was lower in states with a judicial foreclosure process decreasing 24% from January and 35% from February 2010, compared to 14% and 8%, respectively, in states with a nonjudicial foreclosure process.

Decreasing default notice rates also indicate some market stabilization. It also is encouraging that a total of 63,165 U.S. properties received default notices for the first time in February, down 16% from January and 41% from February 2010, hitting a 48-month low and 55% below its 142,064 peak in April 2009.

As expected in states with a judicial foreclosure process default notices decreased 19% from January and 48% on an annual basis, compared to 13% and 31% in states with a nonjudicial foreclosure process.

Likewise, scheduled judicial foreclosure auctions decreased 7% from January and 49% from February 2010, compared to 11% and 7% for scheduled nonjudicial foreclosure auctions.

The Irvine, Calif.-based online marketplace reports on foreclosure properties from over 2,200 U.S. counties.