The undercurrent of foreclosures continues to drag down a struggling housing market, with more than 261,000 properties receiving foreclosure filings—notices of default, auction sales, and bank repossessions—in May, according to data released by RealtyTrac this morning.
While the rate of new foreclosures appears to be abating, bank repossessions are on the rise, despite homeowner-rescue programs such as HOPE Now. Nearly 74,000 properties were seized by banks in May, bringing the number of bank-owned properties in RealtyTrac’s database to more than 700,000.
"Unfortunately most of the bank repossessions we see happening now went into the foreclosure process long before HOPE Now and other loan workout programs were enacted, so those homes never really had a chance of being saved by such programs," Daren Blomquist, marketing communications manager at RealtyTrac, told BUILDER this week.
And, many of these homes would probably have been eligible for such assistance. Despite widespread coverage of speculators, a minority—33 percent—of homes in active foreclosure (excluding real estate-owned homes (REOs), properties that have been foreclosed and taken back by the lender) appear to be investor-owned, according to RealtyTrac analysis done in early May.
But this data also revealed some new challenges for the housing market. Georgia, for example, experienced a 100 percent jump in the number of REO properties in May, compared to the previous month. "The foreclosure process is quite fast in Georgia, so it could be that we're seeing properties show up in the REO category faster than in other states," Blomquist explained. Georgia now has more than 4,100 bank-owned properties.
However, given the glut of new and existing homes on the market today, banks are having a hard time unloading these assets.
"The banks appear to be open to almost any venue for getting their properties sold, whether that be a highly marketed big event auction or via the foreclosure bus tours that we are seeing more and more of around the country," Blomquist said. "I recently rode along on one of these bus tours, and the agents sponsoring it said that after they started the tour, lenders began contacting them to get their homes on the tour. I think banks are beginning to really capitulate on price as well, which is the ultimate sign that they are eager to unload this inventory."
That’s bad news for builders. Since foreclosures already sell for 15 percent to 20 percent less than new homes, according to research by home building analyst Ivy Zelman, this growing inventory of bank-owned properties may put even more pressure on new-home pricing.
Alison Rice is senior editor, online, at BUILDER magazine.