Foreclosure Legacy From The Housing Crisis Is Finally Dead
Share of Foreclosure Auctions Sold to Real Estate Investors Back Above Pre-Recession Levels
By John Triplett
NationalREIA
Foreclosures have been steadily dropping and have finally reached a level that existed before the housing crisis, according to a release from ATTOM Data Solutions, parent company of RealtyTrac.
“Foreclosure activity has been on a steady slide downward over the past six years, finally dropping back below pre-crisis levels in September,” Daren Bloomquist, senior vice president at ATTOM, said in the release.
“While we’ve known that the national foreclosure problem has been dying a long, slow death for quite some time, the final nail in the coffin of the foreclosure crisis is the year-over-year decrease in the average foreclosure timeline nationwide that we saw in Q3 2016 — the first time that’s happened since we began tracking foreclosure timelines in Q1 2007,” Blomquist said.
“The decrease in the average foreclosure timeline indicates that banks have worked through the bulk of the legacy foreclosure backlog in most states — with a few lingering exceptions — and that most of the foreclosures being completed now are relatively recent defaults that are more efficiently progressing through the foreclosure pipeline,” Blomquist added.
Investors buying foreclosures
Third-party investors purchased 44 percent of all properties sold at foreclosure auction in the third quarter, with the remaining 56 percent transferring back to the foreclosing lender at the auction.
There were a total of 293,190 U.S. properties with foreclosure filings in Q3 2016, up 4 percent from the previous quarter but down 10 percent from a year ago. It was the fourth consecutive quarter where foreclosure activity has decreased on a year-over-year basis.
Average time to foreclose decreases annually for first time in report history
Properties foreclosed in Q3 2016 took an average of 625 days to complete foreclosure, down from 631 days in the previous quarter and down from 630 days a year ago — the first year-over-year decrease since ATTOM began tracking average foreclosure timelines in Q1 2007.
The average time to foreclose decreased from a year ago in 19 states, including Nevada (down 22 percent), Massachusetts (down 22 percent), Michigan (down 21 percent), Oregon (down 20 percent), and Texas (down 20 percent).
States with the shortest foreclosure timelines for properties foreclosed in the third quarter were Virginia (196 days), New Hampshire (230 days), Texas (246 days), Minnesota (250 days), and Mississippi (253 days). All five states with the shortest foreclosure timelines employ the non-judicial foreclosure process.
Other states with foreclosure rates in the top 10 highest nationwide in September were Maryland (one in every 955 housing units with a foreclosure filing); South Carolina (one in every 1,049); Utah (one in every 1,258); Connecticut (one in every 1,290); and New Mexico (one in every 1,324).
September foreclosure starts drop to more than 11-year low
A total of 34,685 properties started the foreclosure process in September, down 13 percent from the previous month and down 20 percent from a year ago to the lowest level since May 2005 — a more than 11-year low.
Some increases in the West
There were 27,514 properties repossessed by lenders (REO) in September, down 12 percent from the previous month and down 32 percent from a year ago to the lowest level since February 2015.
Counter to the national trend, nine states posted a year-over-year increase in REO activity in September, including:
- Arizona (up 44 percent)
- Massachusetts (up 40 percent)
- Washington (up 18 percent)
- Connecticut (up 16 percent)
- California (up 12 percent).
Investors purchase 44 percent of properties sold at foreclosure auction in Q3 2016
The 44 percent sold to third-party investors was the highest share going back as far as Q1 2000 — the earliest data is available — and well above the pre-recession peak of 30 percent in Q2 2005.
Of the properties sold to third-party investors at the foreclosure auction in Q3 2016, 38 percent were sold to institutional investors, defined as entities purchasing at least 10 properties in a calendar year. That was up from 32 percent in the previous quarter and 26 percent a year ago but still below the peak of 70 percent in Q2 2009.
Report methodology
The ATTOM Data Solutions U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing entered into the ATTOM Data Warehouse during the month — broken out by type of filing. Some foreclosure filings entered into the database during the month may have been recorded in previous months. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population.
