Newly initiated foreclosures are on the rise, a sign that banks
are moving more aggressively to clear out the backlog of distressed
properties that has been weighing down the housing market.
Foreclosure starts in May showed their first annual increase in
27 months, exceeding their May 2011 level by 16 percent, according
to figures released today by RealtyTrac. Just over 109,000
properties were subjected to initial foreclosure filings in May, an
increase of 12 percent over the April level.
Overall foreclosure activity down
Total foreclosure filings, which also include scheduled auctions
and bank repossessions, were up 9 percent for the month but
continued to trend downward on an annual basis, down 4 percent from
their May 2011 level.
"U.S. foreclosure activity has now decreased on a
year-over-basis for 20 straight months including May, but the jump
in May foreclosure starts shows that it's going to be a bumpy ride
down to the bottom of this foreclosure cycle," said Brandon Moore,
More short sales expected
Moore said he expects that an increasing share of these new
foreclosures will end up as short sales or be purchased at auction
by third parties, rather than becoming bank repossessions. He said
banks have been increasingly recognizing that short sales can help
them cut their losses on distressed properties, as well as letting
them avoid taking on repossessed properties that they have to
maintain, manage and sell.
"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."
Nearly 206,000 U.S. homes were the subject of some type of
foreclosure action in May, after two months below the 200,000
level. Of those, nearly 55,000 were bank repossessions,
representing an 18 percent annual decline from their May 2011
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