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By Bob Ivry, Bloomberg.com
Banks repossessed twice as many homes in May and foreclosure filings rose 48 percent from a year ago as falling house prices trapped borrowers in mortgages they couldn't afford, RealtyTrac Inc. said in a report today.
One in every 483 U.S. households either lost the home to foreclosure, received a default notice or was warned of a pending auction, RealtyTrac said. That was the highest rate since the Irvine, California-based company began reporting in January 2005 and the 29th consecutive month of year-over-year increases. Nevada, California and Arizona posted the highest rates in the U.S. and New Jersey entered the top 10.
``It's definitely a different kind of market than what we got used to a couple years ago,'' said Devin Reiss, owner of Realty 500 Reiss Corp. in Las Vegas. ``We used to sell homes in a day. Now 50 percent of our sales are foreclosures.''
Foreclosures add to inventory and crowd out regular sales, Michelle Meyer and Ethan Harris, economists at Lehman Brothers Holdings Inc. in New York, wrote in a report yesterday. Foreclosures will account for 30 percent of national home sales this year as 1.2 million foreclosed single-family homes will eventually enter the market, they said. They estimate foreclosed properties, which typically sell for about 20 percent less than other homes, will depress home prices nationally by 6 percent.
Feedback Loop
``The risk is that an adverse feedback loop will develop, in which problems in the housing market undercut the economy, causing even more stress in the housing and mortgage markets,'' Meyer and Harris wrote.
The percentage of total outstanding U.S. homes in some stage of foreclosure in the first quarter was 2.47, the Washington-based Mortgage Bankers Association reported. The average over the last 30 years has been 0.98 percent, the industry group said. RealtyTrac's numbers reflect new filings.
A homeowner usually receives a notice of default after falling more than 90 days behind on mortgage payments. If the borrower still doesn't pay what's owed, the property is sold to the highest bidder at an auction, typically held at a county courthouse. If bids don't reach a set amount, the lender takes ownership. Such houses are referred to as REO, or ``real estate- owned.''
Repossessions
Lenders took possession of 73,794 houses in May, more than doubling the 28,548 REOs in May 2007, RealtyTrac said. That pushed total REOs to more than 700,000, RealtyTrac said.
``Right now, lenders are afraid to lend and buyers are afraid they'll be under water in a year, so unless something dramatic happens we're going to continue to see the trend go in the wrong direction,'' said Rick Sharga, RealtyTrac's vice president of marketing.
Legislation that would allow the federal government to guarantee up to $300 billion in refinanced mortgages passed the House of Representatives and awaits debate in the Senate, which is scheduled to recess before the July 4 holiday.
Government help would make it easier for homebuyers to get loans and would ease the number of foreclosures, said John Gall, president of the Arizona Association of Realtors and owner of Arizona Land Quest LLC in Kingman, Arizona.
``Resolving credit issues is going to require cooperation between Wall Street and Washington to provide a secure platform for lenders to loosen up their criteria,'' Gall said. ``It would absolutely help here in Arizona.''
Arizona
Arizona's foreclosure rate -- one in every 201 households received a filing in May -- was a 119 percent increase compared with May 2007 and ranked third in the U.S., RealtyTrac said.
Only Nevada, with one in every 118 households, and California, with one in every 183, had higher filing rates in May, the company said.
One in every 467 New Jersey households received a foreclosure filing in May, making it No. 10 on RealtyTrac's list of states. That represented an 89 percent increase from a year ago and a 44 percent increase from April, RealtyTrac said.
Other states in the top 10 were Florida, Ohio, Michigan, Georgia, Texas and Illinois.
The number of national foreclosure filings grew 7 percent from April, according to RealtyTrac.
The nationwide rate of default warnings in May increased 1 percent from April and the number of auction notices fell 3 percent, the company said.
Stockton, California
Metropolitan areas in California and Florida accounted for nine out of the top 10 metro foreclosure rates for the second month in a row, RealtyTrac said. Seven California metro areas were in the top 10: Stockton, Merced, Modesto, Riverside-San Bernardino, Vallejo-Fairfield, Bakersfield and Sacramento.
Stockton's rate, one in every 75 households, was more than six times the national average, the company said.
``One of the big problems is the banks have been deluged and are way behind in actually doing the foreclosures,'' said Alan Nevin, chief economist with the California Building Industry Association in San Diego. Nevin said he's forecasting lower foreclosure rates in California starting in the last three months of the year.
The Cape Coral-Fort Myers area, on Florida's Gulf Coast, had the second-highest metro foreclosure rate in May, with one in every 79 households. The other Florida area in the top 10 was Port St. Lucie-Fort Pierce, on the Atlantic coast, at No. 10.
The only city outside Florida and California in the top 10 was Las Vegas.
RealtyTrac said it has a database of more than 1.5 million properties and monitors foreclosure filings, including default notices, auction sale notices and bank seizures.
One in every 483 U.S. households either lost the home to foreclosure, received a default notice or was warned of a pending auction, RealtyTrac said. That was the highest rate since the Irvine, California-based company began reporting in January 2005 and the 29th consecutive month of year-over-year increases. Nevada, California and Arizona posted the highest rates in the U.S. and New Jersey entered the top 10.
``It's definitely a different kind of market than what we got used to a couple years ago,'' said Devin Reiss, owner of Realty 500 Reiss Corp. in Las Vegas. ``We used to sell homes in a day. Now 50 percent of our sales are foreclosures.''
Foreclosures add to inventory and crowd out regular sales, Michelle Meyer and Ethan Harris, economists at Lehman Brothers Holdings Inc. in New York, wrote in a report yesterday. Foreclosures will account for 30 percent of national home sales this year as 1.2 million foreclosed single-family homes will eventually enter the market, they said. They estimate foreclosed properties, which typically sell for about 20 percent less than other homes, will depress home prices nationally by 6 percent.
Feedback Loop
``The risk is that an adverse feedback loop will develop, in which problems in the housing market undercut the economy, causing even more stress in the housing and mortgage markets,'' Meyer and Harris wrote.
The percentage of total outstanding U.S. homes in some stage of foreclosure in the first quarter was 2.47, the Washington-based Mortgage Bankers Association reported. The average over the last 30 years has been 0.98 percent, the industry group said. RealtyTrac's numbers reflect new filings.
A homeowner usually receives a notice of default after falling more than 90 days behind on mortgage payments. If the borrower still doesn't pay what's owed, the property is sold to the highest bidder at an auction, typically held at a county courthouse. If bids don't reach a set amount, the lender takes ownership. Such houses are referred to as REO, or ``real estate- owned.''
Repossessions
Lenders took possession of 73,794 houses in May, more than doubling the 28,548 REOs in May 2007, RealtyTrac said. That pushed total REOs to more than 700,000, RealtyTrac said.
``Right now, lenders are afraid to lend and buyers are afraid they'll be under water in a year, so unless something dramatic happens we're going to continue to see the trend go in the wrong direction,'' said Rick Sharga, RealtyTrac's vice president of marketing.
Legislation that would allow the federal government to guarantee up to $300 billion in refinanced mortgages passed the House of Representatives and awaits debate in the Senate, which is scheduled to recess before the July 4 holiday.
Government help would make it easier for homebuyers to get loans and would ease the number of foreclosures, said John Gall, president of the Arizona Association of Realtors and owner of Arizona Land Quest LLC in Kingman, Arizona.
``Resolving credit issues is going to require cooperation between Wall Street and Washington to provide a secure platform for lenders to loosen up their criteria,'' Gall said. ``It would absolutely help here in Arizona.''
Arizona
Arizona's foreclosure rate -- one in every 201 households received a filing in May -- was a 119 percent increase compared with May 2007 and ranked third in the U.S., RealtyTrac said.
Only Nevada, with one in every 118 households, and California, with one in every 183, had higher filing rates in May, the company said.
One in every 467 New Jersey households received a foreclosure filing in May, making it No. 10 on RealtyTrac's list of states. That represented an 89 percent increase from a year ago and a 44 percent increase from April, RealtyTrac said.
Other states in the top 10 were Florida, Ohio, Michigan, Georgia, Texas and Illinois.
The number of national foreclosure filings grew 7 percent from April, according to RealtyTrac.
The nationwide rate of default warnings in May increased 1 percent from April and the number of auction notices fell 3 percent, the company said.
Stockton, California
Metropolitan areas in California and Florida accounted for nine out of the top 10 metro foreclosure rates for the second month in a row, RealtyTrac said. Seven California metro areas were in the top 10: Stockton, Merced, Modesto, Riverside-San Bernardino, Vallejo-Fairfield, Bakersfield and Sacramento.
Stockton's rate, one in every 75 households, was more than six times the national average, the company said.
``One of the big problems is the banks have been deluged and are way behind in actually doing the foreclosures,'' said Alan Nevin, chief economist with the California Building Industry Association in San Diego. Nevin said he's forecasting lower foreclosure rates in California starting in the last three months of the year.
The Cape Coral-Fort Myers area, on Florida's Gulf Coast, had the second-highest metro foreclosure rate in May, with one in every 79 households. The other Florida area in the top 10 was Port St. Lucie-Fort Pierce, on the Atlantic coast, at No. 10.
The only city outside Florida and California in the top 10 was Las Vegas.
RealtyTrac said it has a database of more than 1.5 million properties and monitors foreclosure filings, including default notices, auction sale notices and bank seizures.
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