Foreclosure activity falls to 42 month low in May

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June 17, 2011

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Foreclosure activity falls to 42-month low in May

Default notices drop to lowest monthly total since December 2006

By Inman News
Inman News™

Foreclosure-related filings on U.S. properties fell 33 percent year-over-year in May, hitting a 42-month low, according to a report from foreclosure data site RealtyTrac.

One in every 605 housing units, or 214,927 properties, received a foreclosure-related filing such as a default notice, scheduled auction, or bank repossession. That's a 2 percent drop from April and a 33 percent drop from a year ago.

"Foreclosure processing delays continue to mask the true face of the foreclosure situation, although there were some clues in the May numbers of what lies behind that mask," said James J. Saccacio, RealtyTrac's CEO, in a statement.

"First, activity spiked in May for various stages of the foreclosure process in some states, a pattern that has occurred in several states over the past few months. This pattern provides evidence that lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures and as they determine that some local markets are able to absorb more foreclosure inventory.

"Second, while the inventory of properties in the foreclosure process has declined steadily over the past six months -- thanks in large part to 16 consecutive months of year-over-year declines in new default notices -- the inventory of unsold bank-owned REOs increased in April and May even as new REO activity slowed in both of those months. That points to continued weak demand from buyers, making it tough for lenders to unload their REO inventory. Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month."

Default notices declined to a 53-month low in May, falling to 58,797, the lowest monthly total since December 2006. Default notices fell 7 percent month-to-month and 39 percent year-over-year.

After eight straight months of decreases, the number of foreclosure auctions scheduled rose slightly, to 89,251, up 3 percent from April but down 33 percent from a year ago.

Bank repossessions fell 4 percent month-to-month and 29 percent year-over-year in May, with lenders taking 66,879 homes into their real-estate owned (REO) inventories.

"Since the so-called robo-signing controversy came to light in October 2010, REO activity has followed a roller coaster pattern, with five monthly decreases and three monthly increases," the report said.

States with a judicial foreclosure process saw activity decrease 45 percent year-over-year in May, while states with a nonjudicial foreclosure process saw activity fall 25 percent year-over-year. Scheduled auctions rose in both judicial and nonjudicial foreclosure states on a monthly basis, 6 percent and 2 percent, respectively. REO activity rose 1 percent month-to-month in judicial foreclosure states and fell 6 percent in nonjudicial foreclosure states.

Five states accounted for 51 percent of all foreclosure activity last month. California had the highest volume of properties receiving a filing (51,906), followed by Florida (19,192), Michigan (14,614), Arizona (13,122), and Nevada (11,039).

Nevada had the highest foreclosure rate among states for the 53rd straight month in May, with one in 103 housing units receiving a foreclosure-related filing that month. Overall foreclosure activity in the state fell 23.1 percent year-over-year, with bank repossessions falling 21 percent from an all-time monthly high in April. Default notices rose 8 percent and scheduled auctions fell 1 percent on a monthly basis.

For the sixth straight month, Arizona held the second-highest foreclosure rate in the nation with one in 210 housing units receiving a filing. Overall foreclosure activity in Arizona fell 18.5 percent year-over-year. Scheduled auctions rose 4 percent month-to-month and bank repossessions fell 8 percent month-to-month but were essentially flat year-over-year.

Scheduled auctions also rose month-to-month in California, 16 percent, though default notices fell 16 percent and REOs fell 25 percent. Though overall foreclosure activity fell 27.9 percent, the Golden State had the third-highest foreclosure rate in the nation, with one in 259 units receiving a foreclosure filing.

10 states with the highest foreclosure activity rates in the nation in May 2011:

Rank State Foreclosure activity rate % change year-over-year foreclosure activity
1 Nevada 1 in 103 housing units -23.1%
2 Arizona 1 in 210 units -18.5%
3 California 1 in 259 units -27.9%
4 Michigan 1 in 311 units -28.1%
5 Utah 1 in 365 units -0.5%
6 Georgia 1 in 387 units -23.8%
7 Idaho 1 in 460 units -32.1%
8 Florida 1 in 461 units -62.1%
9 Illinois 1 in 500 units -29.8%
10 Colorado 1 in 518 units -13.6%

Source: RealtyTrac

Among metro areas with a population of 200,000 or more, four states accounted for those with the ten highest foreclosure rates: California, Nevada, Arizona, and, for the first time, a Michigan metro, Flint, joined the list.

Rank Metro Foreclosure activity rate
1 Las Vegas 1 in 89 housing units
2 Stockton, Calif. 1 in 139 units
3 Vallejo-Fairfield, Calif. 1 in 140 units
4 Modesto, Calif. 1 in 154 units
5 Reno-Sparks, Nev. 1 in 158 units
6 Phoenix-Mesa-Scottsdale 1 in 165 units
7 Bakersfield, Calif. 1 in 169 units
8 Riverside-San Bernardino-Ontario, Calif. 1 in 169 units
9 Flint, Mich. 1 in 182 units
10 Merced, Calif. 1 in 193 units

Source: RealtyTrac

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