Foreclosures spike in May
(MoneyWatch) Foreclosures in the U.S. are rising.
Default notices, scheduled auctions, and bank repossessions were reported on 205,990 U.S. properties in May, up 9 percent from the previous month, according to research firm RealtyTrac. Despite the uptick, foreclosure filings remain 4 percent below May 2011 levels.
Foreclosure starts -- meaning default notices or scheduled foreclosure auctions, depending on the state -- also rose in May, increasing 12 percent from April and 16 percent compared with the year-ago period. This is the first year-over-year increase after 27 consecutive months of annual declines.
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"U.S. foreclosure activity has now decreased on a year-over-year basis for 20 straight months including May, but the jump in May foreclosure starts shows it's going to be a bumpy ride down to the bottom of this foreclosure cycle," RealtyTrace CEO Brandon Moore said in a statement.
After three straight monthly decreases, bank repossessions (known as REOs) also edged upward, rising seven percent in May. Even so, REOs remain 18 percent below May 2011 levels.
If there's any good news in this report, it's that pre-foreclosure sales, or "short sales," are increasing. In an effort to reduce their REO inventory, banks are working with homeowners to unload their homes before they enter foreclosure. This means fewer homes selling at steep foreclosure discounts, taking neighborhood property values down with them.
"Disposing of distressed homes by pre-foreclosure sale can also benefit lenders and servicers because pre-foreclosure homes sell at a higher average price point than bank-owned homes," Moore said. "Our first quarter foreclosure sales report showed that the average price of a pre-foreclosure home was more than $27,000 higher than the average price of a bank-owned home, which quickly adds up given that there have been an average of 1.6 million nationwide foreclosure starts over the past five years."
Foreclosure activity in Georgia increased 33 percent from April to May, and 30 percent annually, making it the state with the highest foreclosure rate in the country. It's the first time since 2006 the state has topped the list. In Atlanta alone, one in every 224 homes had a foreclosure filing in May, the second-highest foreclosure rate among the 20 largest metro areas.
Arizona posted the second-highest foreclosure rate in the nation in May after dropping to a 53-month low in April. Foreclosure activity increased 24 percent higher month-over-month, but remained 29 percent below the same time last year.
Nevada, California, Illinois, Florida, Ohio, Michigan, South Carolina, and Utah rounded out the top 10 states with the highest foreclosure rates last month.
