Indicating a rebound in the housing sector, the foreclosure market report – released by RealtyTrac – showed overall foreclosure activity in the first half of 2013 to be on a downward trend. As per this leading online marketplace of foreclosure properties, foreclosure filings plunged 23% year over year and 19% from the last 6 months, bringing the total number of properties receiving default, auction or repossession notices to 801,359.
For the first six months of 2013, 409,491 foreclosure starts – default notices issued and foreclosure auctions (depending on the state’s foreclosure procedure) – were filed across the U.S. As per the report, foreclosure starts are expected to reach 800,000 by the end of this year, down from 1.1 million in 2012.
Meanwhile, an aggregate of 248,538 bank repossessions (REOs) occurred in the first six months of 2013. Given this pace, REOs are anticipated to reach 500,000 by the year-end, down from approximately 671,000 in 2012.
Nevertheless, foreclosure activity continues to remain a drag for many states. The top 5 states with the highest foreclosure rates in the first half of the year were Florida, Nevada, Illinois, Ohio and Georgia. Additionally, the procedure to complete the foreclosure of properties in the second quarter took an average of 526 days, up from 477 days in the previous quarter.
The drop in foreclosure activity is a result of the switching of mortgage servicers and the government to other options to prevent foreclosures. However, foreclosure activity is expected to remain volatile, as processes that are being used in handling these differ from state to state.
Foreclosure activity is expected to increase in the judicial states as the latter have substantial backlogs to clear. This is evident from Jun 2013 data, as judicial foreclosure auctions were scheduled for 28,296 properties, up 34% from Jun 2012 and nearly 1% from May 2013.
This increase demonstrates that delayed foreclosure cases in judicial states are now moving at a faster pace through foreclosure completion. Further, as the major servicers – JPMorgan Chase & Co. (JPM - Analyst Report), Bank of America Corp (BAC - Analyst Report), Citigroup Inc. (C - Analyst Report), Ally Financial Inc. and Wells Fargo & Company (WFC - Analyst Report) – adjust to the new rules set under the National Mortgage Settlement as well as several other state laws, foreclosure activity is bound to rise in the near term.
However, stabilizing housing prices are likely to aid homeowners in avoiding foreclosures. Further, the rate at which properties are entering the foreclosure procedure is expected to gradually slacken, thereby raising housing prices going forward.
The housing market will get an opportunity to regain a strong foothold if there are sufficient buyers for these properties. Moreover, with the gradual recovery of the U.S. economy, reduction of unemployment, improving consumer confidence and a rise in demand for homes, property prices are poised to rise further in the future.