Foreclosures continued to fall in the first half of 2015, dropping to a 10-year low across the U.S. and further tightening available housing inventory, according to a new study from RealtyTrac.com.
While foreclosures are now in some cases below pre-housing-crisis levels, some specific markets still have a higher than normal number of foreclosures due to specific local market conditions.
There were 597,589 U.S. properties with foreclosure filings — default notices, scheduled auctions and bank repossessions — in the first half of 2015, down 13 percent from the previous six months and down 3 percent from the same time period in 2014.
A total of 304,439 U.S. properties started the foreclosure process in the first half of the year, down 4 percent from a year ago and 18 percent below foreclosure starts in the first half of 2006 before the housing price bubble burst. Foreclosure starts for the first half of 2015 were at their lowest level in any year since RealtyTrac began tracking in 2006 — a 10-year low.
Daren Blomquist
“U.S. foreclosure starts have not only returned to pre-housing-crisis levels, they have fallen well below those pre-crisis levels and are still searching for a floor, down 4 percent from a year ago,” Daren Blomquist, vice president at RealtyTrac.com, said in the news release announcing the study’s results.
“Loans originated in the last five years continue to perform better than historic norms, with tighter lending standards and more cautious borrower behavior acting as important guardrails for the real estate boom of the past three years.”
There were 19 states where foreclosure starts in the first half of 2015 were at or below their pre-crisis levels of 2006, including California, Florida, Arizona, Georgia and Illinois.
“The reduction of foreclosures is adding to the limited inventory in the market as a whole and increased appreciation,” Greg Smith, owner/broker at RE/MAX Alliance, in Denver, said in the release. In Colorado, foreclosure starts in the first half of 2015 were less than half the number of foreclosure starts in the first half of 2006. “Today the decline in foreclosures, combined with limited new construction, nominal resale inventory and delayed entry of Millennials in to the buying cycle is contributing to a very robust real estate market for the foreseeable future.”
Bank repossessions still 37 percent above pre-crisis levels
A total of 209,281 U.S. properties were repossessed by lenders in first half of 2015, up 20 percent from a year ago and 37 percent above the number of bank repossessions (REOs) in the first half of 2006 before the housing bubble burst.
“Less-disciplined loans originated during the last housing boom continue to account for the majority of distress still hanging over the housing market, with two-thirds of all loans in foreclosure on loans originated between 2004 and 2008,” Blomquist said in the release.
“An increasing number of these failed bubble-era loans finally exited the foreclosure process in the first half of 2015, resulting in accelerating bank repossessions that are still well above pre-crisis levels along with record-long average foreclosure timelines for properties foreclosed in the second quarter.”
First-half bank repossessions in 2015 were above 2006 levels in 35 states, including California, Florida, Arizona, Illinois and Nevada.
“The workout of distressed properties continues to dwindle back toward normal market ratios. Although it’s been a long recovery, the bad loans and bank-owned properties are winding their way through the long process,” Mark Hughes, chief operating officer with First Team Real Estate in Southern California, said in the release. “Certainly less inventory in an already low-inventory environment will gas the fast-paced transaction flow even more.”
“There is still a tail left in the liquidation of our distressed properties in Florida due to our ponderous judicial system,” Mike Pappas, CEO and president of Keyes Company in south Florida, said in the release. “However, our current robust market has muted the remnant REO noise.”
Florida, New Jersey, Maryland post highest foreclosure rates in first half of 2015
Florida foreclosure activity in the first half of 2015 decreased 22 percent from a year ago, but the state still posted the nation’s highest foreclosure rate: 1.06 percent of housing units (one in every 95) with a foreclosure filing during the six-month period.
New Jersey foreclosure activity in the first half of 2015 increased 24 percent from a year ago, boosting the state’s foreclosure rate to second highest nationwide: 0.92 percent of housing units (one in every 109) with a foreclosure filing during the six-month period.
Maryland’s foreclosure rate was almost identical to the New Jersey foreclosure rate, but was slightly lower and ranked No. 3 highest among the states despite a 1 percent year-over-year decrease in foreclosure activity.
Nevada foreclosure activity in the first half of 2015 increased 10 percent from a year ago, and the state’s foreclosure rate — 0.79 percent of housing units (one in every 126) with a foreclosure filing — ranked fourth highest among the states, while the Illinois foreclosure rate — 0.74 percent of housing units (one in every 135) with a foreclosure filing — ranked fifth highest despite a 9 percent year-over-year decrease in foreclosure activity in the first six months of 2015.
Other states with foreclosure rates ranking among the top 10 highest in the first half of 2015:
- Delaware (0.61 percent of housing units with a foreclosure filing)
- Ohio (0.58 percent)
- Indiana (0.54 percent)
- South Carolina (0.54 percent)
- Tennessee* (0.53 percent).
Atlantic City posts top metro foreclosure rate in first half of 2015
With 1.70 percent of housing units (one in every 59) with a foreclosure filing in the first half of 2015, Atlantic City, New Jersey, posted the nation’s highest foreclosure rate among metropolitan statistical areas with a population of 200,000 or more.
Eight Florida cities posted first-half foreclosure rates among the 10 highest:
- Tampa at No. 2 (1.22 percent of housing units with a foreclosure filing)
- Lakeland at No. 3 (1.21 percent); Jacksonville at No. 4 (1.20 percent)
- Ocala at No. 5 (1.18 percent)
- Miami at No. 6 (1.15 percent)
- Orlando at No. 8 (1.07 percent)
- Deltona-Daytona-Beach-Ormond Beach at No. 9 (1.05 percent)
- Crestview-Fort Walton Beach-Destin at No. 10 (0.97 percent)
Rockford, Illinois, posted the nation’s seventh highest metro foreclosure rate: 1.14 percent of housing units (one in every 87) with a foreclosure filing in the first six months of 2015.
Eight of nation’s 20 largest metro areas post annual increases in foreclosure activity
Eight of the nation’s 20 largest metro areas posted a year-over-year increase in foreclosure activity in the first half of 2015 compared to a year ago:
- Boston (up 29 percent)
- St. Louis (up 25 percent)
- New York (up 24 percent)
- Houston (up 19 percent)
- Dallas (up 19 percent)
- Detroit (up 13 percent)
- Philadelphia (up 8 percent)
- Baltimore (up 5 percent)
Among the nation’s 20 largest metro areas, those posting the biggest decreases in foreclosure activity in the first half of 2015 compared to a year ago were Miami (down 30 percent), Riverside-San Bernardino in Southern California (down 15 percent), Seattle (down 14 percent), Los Angeles (down 14 percent) and Phoenix (down 14 percent).
“The drop in foreclosures in the Seattle area signifies that housing recovery in our market is firmly in place,” Matthew Gardner, Chief Economist at Windermere Real Estate, in Seattle said in the release. “Fewer distressed listings also functions to push up average home prices in a market that is woefully low on inventory.”
States with the biggest increase in foreclosure activity in the first half of the year compared to a year ago included:
- Massachusetts (up 43 percent)
- New York (up 31 percent)
- New Jersey (up 24 percent)
- Texas (up 21 percent)
- Michigan (up 17 percent)
Average foreclosure timelines hit new highs for homes foreclosed in second quarter
Foreclosures completed in the second quarter of 2015 took an average of 629 days from the first public notice of foreclosure to complete the foreclosure process, the longest average time to foreclose since RealtyTrac began tracking in the first quarter of 2007.
States with the longest foreclosure timelines were New Jersey (1,206 days), Hawaii (1,060), Montana (1,028), New York (1,000) and Florida (989).
States with the shortest foreclosure timelines were South Dakota (177), North Carolina (198), Virginia (229), Wyoming (242) and Alabama (244).
Report methodology
The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing entered into the RealtyTrac database during the month — broken out by type of filing. Some foreclosure filings entered into the database during the month may have been recorded in previous months. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac’s report incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee’s Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). The report does not count a property again if it receives the same type of foreclosure filing multiple times within the estimated foreclosure timeframe for the state where the property is located.
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