Foreclosures Decline in May, Repossessions Hit All-Time High
In another sign that the foreclosure crisis might have peaked, foreclosure filings declined 3 percent in May, RealtyTrac reported this morning. Florida, Nevada, California and Arizona remain the hardest-hit states. From the report:
“The numbers in May continued and confirmed the trends we noticed in April: overall foreclosure activity leveling off while lenders work through the backlog of distressed properties that have built up over the past 20 months,” said James J. Saccacio, chief executive officer of RealtyTrac. “Defaults and scheduled auctions combined increased by 28 percent from 2007 to 2008 and another 32 percent from 2008 to 2009 — creating a build-up of delayed bank repossessions. Lenders appear to be ramping up the pace of completing those forestalled foreclosures even while the inflow of delinquencies into the foreclosure process has slowed.”
And lenders “ramping up” the pace of foreclosure pushed bank repossession to an all-time high. Last month, banks and other lenders took control of 93,777 homes, 44 percent more than they did in May 2009. But a RealtyTrac expert warned that the new peak in repossessions does not signal that banks believe that the housing crisis has bottomed out. (Banks have little incentive to repossess homes if they think the housing market is declining. Why flood the market with new properties, furthering the decline in home values?) Instead, banks are working through the current backlog, rather than upping new foreclosures: “What it looks like is that the lenders are focusing on processing the delinquent loans they already have rather than initiating new foreclosures,” Rick Sharga told CNBC. “They’re managing inventory to prevent a free fall in home prices.”
The crisis remains localized; 10 states have 70 percent of the foreclosures. But there was good news for the places suffering from the highest foreclosure rates:
[All but one metro area] in the top 10 [for foreclosure rates showed] declining foreclosure activity on a year-over-year basis: No. 1 Las Vegas was down nearly 18 percent; No. 2 Merced, Calif., was down 7 percent; No. 3 Modesto, Calif., was down nearly 28 percent; No. 5 Cape Coral-Fort Myers, Fla., was down nearly 19 percent; No. 6 Stockton, Calif., was down 33 percent; No. 7 Riverside-San Bernardino-Ontario, Calif., was down nearly 29 percent; No. 8 Bakersfield, Calif., was down 19 percent; No. 9 Reno-Sparks, Nev., was down nearly 18 percent; and No. 10 Phoenix was down nearly 9 percent.
What would force the foreclosure rates back up? Declining home values, caused by slack demand due to sustained high unemployment and the sunset of the Obama administration’s interventions into the housing market, including the homebuyer’s tax credit.