Data firm RealtyTrac reports there were 45,072 foreclosure starts in August 2015 — a decline of 19 percent year-over-year to the lowest level since November 2005. The average number of new foreclosure filings per month is now consistently lower than it was in the years immediately preceding the Great Recession. Back in mid-2009, at the height of the housing crisis, new foreclosure filings peaked just above 200,000 per month.
One key reason for the steady decline in new foreclosures is that mortgage underwriting standards are much tighter now than in the early to mid-2000s. Banks will only approve loans to borrowers who can demonstrate a steady work history and income now, and most buyers come to the table with at least some down payment.
At the same time, there has been a 40 percent increase in bank repossessions in the past year. These are properties that banks seize at the end of the foreclosure process and then typically put back on the market as soon as they’re fixed-up again for sale.
RealtyTrac economist Daren Blomquist says the recent rise in bank repossessions is not a sign of renewed trouble for the housing market.
“They are much more likely to be linked to loans from several years ago that went bad,” says Blomquist. “The homeowner has probably been in trouble — in the foreclosure process — for years.” He points out that most properties now going through the foreclosure process were purchased from 2004 to 2008, when risky mortgage-lending and market speculation by buyers were at their height.
Blomquist says some of the properties now being repossessed by banks have been unoccupied and are in disrepair, and many are in neighborhoods where home values haven’t recovered since the housing crash.
“They’re the bottom-of-the-barrel homes that the banks waited the longest to foreclose on, and they’re now clearing the decks.”
The new influx of cheap bank-owned properties could help homebuyers — at least, those willing to take a risk on a formerly foreclosed property. Would-be buyers now face a market with little housing inventory for sale, rising prices and competitive bidding in many desirable urban areas.
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