RealtyTrac: Foreclosure Activity Status Quo Prevails

RealtyTrac findings showing in May foreclosure filings decreased 2% from April and 33% from May 2010 bringing the monthly foreclosure activity to its lowest level since November 2007 ultimately are not indicative of housing market improvements. At best, the status quo persists.

The May 2011 RealtyTrac U.S. Foreclosure Market Report shows foreclosure processing delays “continue to mask the true face of the foreclosure situation,” RealtyTrac’s chief executive James Saccacio said, despite “some clues” pointing to modest improvements.

For example new default notices dropped 7% month-over-month and 39% annually to the lowest monthly level since December 2006, marking 16 consecutive months of year-over-year declines. “In large part” these decreases are credited to declines in the inventory of properties in the foreclosure process over the past six months.

There was, however, an increase of activity for various stages of the foreclosure process in several states including California, Maryland and Illinois, indicating a new pattern is taking hold.

According to RealtyTrac, it indicates lenders are “somewhat unevenly pushing batches of bad loans through foreclosure” as they deal with paperwork issues and determine what markets can absorb more foreclosure inventory.

At the same time bank-owned inventory increased for the second straight month despite a 4% decrease in new REO activity in May, indicating “weak demand” that slowed REO sales. Despite the fact that bank repossessions decreased 29% from May 2010. “Even at a significantly lower level than a year ago,” Saccacio said, the new supply of REOs exceeds the amount being sold each month.

Rebecca Walzak, CEO of Walzak Consulting Inc., Deerfield Beach, Fla., agrees that RealtyTrac data reaffirm the status quo. “It is absolutely getting harder” to sell REOs in a market where both buyers and sellers are anxious because it is unclear how housing prices may fluctuate.

Individual buyers are still waiting for the prices to reach a more affordable bottom, along with many investor buyers who also are holding off. “Investors won’t buy REO properties unless they’re ready.”

First-time, younger buyers are holding off because “they’re afraid jobs aren’t going to be there tomorrow,” she said, and lenders’ unforgiving credit policies only make homebuying harder.

The uncertainty in the near future of the housing market derives primarily from the prolonged foreclosure processing and moratoria.

Bank repossessions decreased 4% from April and 29% from May 2010. But since the so-called robo-signing controversy came to light in October of last year RealtyTrac said, “REO activity has followed a rollercoaster pattern,” with five monthly decreases and three monthly increases.

Data indicate judicial differences in the state foreclosure practices do not appear to make a significant difference as time goes on.

As of now, at 141,348 properties, the number of nonjudicial foreclosure filings, which include notices of default, scheduled auctions and bank repossessions, account for two-thirds of the national total. Overall nonjudicial foreclosure activity decreased 3% from April and 25% from May 2010.

The number of properties that received foreclosure filings in the judicial foreclosure states was 73,579, equal to April’s total filings and 45% lower compared to total foreclosure filings reported in May 2010.
Month-over-month overall REO activity in nonjudicial foreclosure states decreased 6% compared to a 1% increase in judicial foreclosure states.

However, several states in both nonjudicial and judicial foreclosure states posted “substantial month-over-month increases” in REO activity.

New York, a judicial foreclosure state, reported a 97% increase in REO activity, the highest in the nation.

Other judicial foreclosure states marked lower increases: 21% in New Jersey, 20% in Wisconsin and 18% in Indiana. Among nonjudicial states REO activity increased 79% in Georgia, 36% in Virginia and 19% in Michigan.

Another status quo that indicates a prolonged crisis bound to extend into the future is the concentration of foreclosures.

Nevada, Arizona, California posted the top three foreclosure rates, lead by Nevada for the 53rd straight month in May with one in every 103 housing units receiving a filing.

In total numbers California, Florida, Michigan, Arizona and Nevada account for 51% of U.S. foreclosure activity in May. In California 51,906 properties received a foreclosure filing, followed by 19,192 properties in Florida, 14,614 in Michigan, 13,122 in Arizona and 11,039 in Nevada.