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U.S. Foreclosure Activity Down 11 Percent From Previous Year

Written by JD Esajian

While the real estate market continues to catch fire this summer selling season, foreclosure activity is cooling down — Or is it?

The latest report by RealtyTrac revealed the number of U.S. foreclosure filings was down 20 percent in the first six months of the year, and 11 percent from the first six months of 2015. The Midyear 2016 U.S. Foreclosure Market Report shows there were 533,813 U.S. properties in some stage of foreclosure (default, auction or bank owned) for the first six months of 2016.

According to the report, there were a total of 280,989 U.S. properties with foreclosure filings in the second quarter of 2016, a three percent decrease from the first quarter, and 18 percent from a year ago. However, nationwide foreclosure activity in the second quarter was still 21 percent above the pre-recession average of 232,082 properties, with 19 states posting year-over-year increases in the first half of 2016.

Senior Vice President at RealtyTrac, Daren Blomquist said: “Although there are some local outliers, the downward foreclosure trend continued in the first half of 2016 in most markets nationwide. While U.S. foreclosure activity is still above its pre-recession levels, many of the states hit hardest by the housing crisis have now dropped below pre-recession foreclosure activity levels. With some exceptions, states with foreclosure activity continuing to run above pre-recession levels tend to be those with protracted foreclosure timelines still working through legacy distress from the last housing bust.”

States where foreclosure activity was below the pre-recession level included:
Arizona (13 percent below pre-recession averages); California (25 percent below); Colorado (72 percent below); Georgia (33 percent below); Michigan (46 percent below); Nevada (18 percent below); Ohio (9 percent below); and Texas (46 percent below).

According to RealtyTrac, the month of June saw a total of 94,469 U.S. properties with a foreclosure filing, the lowest level since July 2006. While those numbers appear to show foreclosures on the downward end, certain states continue to show persistence.

States where foreclosure activity was above the pre-recession level included: Florida (26 percent above pre-recession levels); New Jersey (215 percent above); Illinois (36 percent above); New York (127 percent above); Indiana (two percent above); South Carolina (376 percent above); Massachusetts (127 percent above); and Washington (29 percent above).

The report also revealed that 0.40 percent of all housing units (one in 249) in the United States had a foreclosure filing in the first six months of 2016, with New Jersey, Maryland, Delaware posting the top state foreclosure rates. The states with the highest foreclosure rates were: New Jersey (0.98 percent of housing units with a foreclosure filing); Maryland (0.90 percent); Delaware (0.78 percent); Florida (0.70 percent); and Nevada (0.68 percent).

For metropolitan areas with at least 200,000 people, the highest foreclosure rates in the first half of 2016 were: Atlantic City, New Jersey (1.85 percent of housing units with a foreclosure filing); Trenton, New Jersey (1.31 percent); Baltimore (0.96 percent); Lakeland-Winter Haven, Florida (0.91 percent); and Rockford, Illinois (0.91 percent). Other metro areas that ranks among the 10 highest were Philadelphia (0.86 percent); Tampa-St. Petersburg, Florida (0.85 percent); Jacksonville, Florida (0.80 percent); Columbia, South Carolina (0.78 percent); and Chicago (0.76 percent).

Foreclosures Purchased by Investors Reaches 17-Year High

The first half of 2016 saw the lowest level of foreclosures filings for any half-year period since 2006 when RealtyTrac began officially tracking foreclosures. In Q1, foreclosure activity dropped below pre-recession levels in 36 percent of metropolitan statistical areas analyzed, reaching its lowest quarterly total since the fourth quarter of 2006. However, investors continue to acquire foreclosed properties at historic levels.

Third-party investors purchased 27 percent of all U.S. properties sold at foreclosure auctions during the first six months of 2016, the highest percentage in the first six months since 2000. The only other time the share of purchases at foreclosure auctions for third-party investors reached 20 percent or higher was in 2005 (20 percent) and 2015 (22 percent).

The first half of 2016 also witnessed a decline in REO properties (Real Estate Owned), which are foreclosed properties owned by a lender such a bank or creditor. According to RealtyTrac, lenders foreclosed on 197,425 U.S. properties in the first half, a six percent decrease from the previous year. However, foreclosure completions during the same period was 48 percent above the pre-recession average.

There were 26 states that posted a year-over-year increase in REO activity. Of those, top five states were: Alabama (up 73 percent); New York (up 65 percent); New Jersey (up 56 percent); Massachusetts (up 43 percent); and Virginia (up 37 percent).

The rise in foreclosure acquisitions from third-party investors could be attributed to a variety of reasons. Combined with increasing home prices and historically low inventory levels, real estate investors continue to take advantage of market conditions as seen with foreclosures.