Signaling a gradual recovery in the housing market, the foreclosure market report released by RealtyTrac revealed a drop in the overall foreclosure activity in November 2012. As per this leading online marketplace of foreclosure properties, foreclosure filings plummeted 19% from the last-year month and 3% from the prior month. This brought the aggregate number of properties receiving default, auction or repossession notices to 180,817.
Foreclosure starts – default notices issued and foreclosure auctions (depending on the state’s foreclosure procedure) – declined 28% from November 2011 and 13% from October 2012 to 77,494 properties in the reported month. This was the lowest level since December 2006.
Yet, bank repossessions (REOs) grew 5% from the prior-year month and 11% from the last month to 59,134 properties. This marked the first year-over-year rise in REOs since October 2010, when foreclosures were temporarily suspended as a result of detection of flawed documents used for foreclosing properties.
Though overall foreclosure activity dipped in November, it increased in 23 states and the District of Columbia on a year-over-year basis. The top 10 states with the highest foreclosure rates were Florida, Nevada, Illinois, California, South Carolina, Ohio, Arizona, Georgia, Michigan and Indiana.
Decline in foreclosure activity was largely due to the switching of mortgage servicers and the government to other options – short sale, refinancing of loans and loan modifications – to prevent foreclosures. Nevertheless, in the subsequent months, overall foreclosures are expected to rise as major lenders – JPMorgan Chase & Co. (JPM - Analyst Report), Bank of America Corporation (BAC - Analyst Report), Citigroup Inc. (C - Analyst Report), Ally Financial Inc. and Wells Fargo & Company (WFC - Analyst Report) – adjust to new rules set under the National Mortgage Settlement as well as several other laws.
Yet, we believe that gradually stabilizing housing sector and falling unemployment rate are likely to aid homeowners to shun foreclosures in the near term. Also, the rate at which properties are entering the foreclosure procedure is expected to trend down slowly, thereby lifting the housing prices going forward.
However, the dip in foreclosures is expected to be at an uneven pace, as processes that are being used in handling them vary from state to state. Moreover, the housing market will get an opportunity to regain a solid foothold if there are sufficient buyers for these properties.