Getting better at loss mitigation results in foreclosure auction drop
Mortgage servicers are getting better at helping borrowers avoid foreclosure, as evidenced by a declining auction rate, which was also supported by healthy home equity levels, according to an Auction.com analysis.
Completed foreclosure auctions, sold to either third-party buyers or back to the foreclosing lender, fell 9% in the first quarter from a year ago, and 1% from the end of last year.
"The downward trend in the completed foreclosure auction rate is an indication of increased loss mitigation efforts on the part of mortgage servicers combined with a bigger home equity cushion for many borrowers falling into foreclosure," Daren Blomquist, Auction.com vice president of market economics, said in a press release.
But this doesn't mean foreclosures are getting any cheaper. Imbalanced supply and demand dynamics throughout the market pushed up the average sales price for properties sold at foreclosure auction to $147,115 in the first quarter; this is the highest average in the history of this data, and marks an increase of 7% and 8%, respectively, from a year and quarter ago.
"Solid real estate investor demand and a limited supply of distressed properties continues to push average prices up in most parts of the country," said Ali Haralson, Auction.com chief business development officer. "Even in areas with decreasing prices, the decrease can often be explained with a shift in the type of inventory being sold at auction."
As a whole, scheduled foreclosure auctions were down 1% at the start of the year from the same period a year ago, but did rise 4% from the fourth quarter.
"Scheduled foreclosure auctions provide a forward-looking metric for distressed and the increases we're seeing in many of the Western markets signal more distressed sales in that region over the next several months," Blomquist said.