Foreclosure filings – including default notices, scheduled auctions and bank repossessions – were reported on 125,875 U.S. properties in April, an increase of 3% compared to March and an increase of 9% compared to April 2014, according to RealtyTrac's U.S. Foreclosure Market Report.
Driving the increase was a 25% month-over-month jump in bank repossessions (REOs), which were up for a second straight month as mortgage servicers continued to rapidly clear out a backlog of foreclosure volume. In fact, bank repossessions hit a 27-month high in April, according to the report.
RealtyTrac points out that despite the spike, repossessions were 56% below the peak of 102,134 seen in September 2013.
‘The REO increase in April was foreshadowed by a 23-month high in scheduled foreclosure auctions in October 2014,’ explains Daren Blomquist, vice president at RealtyTrac, in a release. ‘Many of those scheduled auctions are now taking place, and properties are going back to the foreclosing lender.
‘Meanwhile, we continue to see foreclosure starts decrease, and foreclosure starts nationwide are now running consistently below pre-crisis levels – indicating that the overall increase in foreclosure activity in April is a continuation of the cleanup phase of the last housing crisis, not the start of a new crisis,’ Blomquist says.
Blomquist adds that although distressed sales usually have a stifling effect on the housing market, an influx of distressed inventory in this particular market could actually help stimulate sales during the spring and summer buying season as new listings become available, often in the middle to lower ranges of the market.
‘Banks are liquidating these distressed properties in a seller's market with a low supply of inventory for sale, which should help them sell quickly and at a price that is relatively close to full market value,’ he adds.
According to the report, REO properties that sold in the first quarter sold in an average of 243 days, down from an average of 300 days in the fourth quarter but up from an average of 226 days in the first quarter of 2014.
The average sale price of REOs sold in the first quarter was 87% of the average estimated market value. In some markets, REOs sold at a much higher price-to-value ratio – for example, in San Diego and in Charlotte, N.C., they sold at 100% of market value, while in San Francisco and Portland, Ore., they sold at 97%.
‘We've seen distressed inventory work its way through the auction and REO process at a varying pace depending on local market conditions and price points,’ says Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. ‘The uptick in April is a natural part of that flow toward equilibrium and a more stable market.’
There were about 51,773 foreclosure starts in April, down 3% compared to March and down 5% from a year ago.
In addition, about 46,777 properties were scheduled for foreclosure auction in April, down 8% compared to March and down 5% from a year ago.