Home Repossessions Hit New Record High
Banks repossessed a record number of homes last month, an ominous sign for a real estate market that has seen demand slide substantially in recent weeks.
Nearly 94,000 properties were repossessed by lenders in May, an increase of 1 percent from April and 44 percent from a year earlier, according to RealtyTrac's most recent U.S. Foreclosure Market Report. "We are going through the eye of the storm," says
The rise in home repossessions is linked to developments in the Obama administration's housing rescue initiative, says
"You can't save everybody," says
The increase in repossessions comes even as notices of default -- the first step in the foreclosure process -- fell 22 percent from a year earlier to their lowest level since
[Check out Home Prices Have Further to Fall: Here's Why]
With their books already cluttered with distressed properties, many banks have delayed sending out default notices -- which initiate the foreclosure process -- until they have completed other transactions, he says. "Typically, you don't get a foreclosure notice until you are 90 days past due," Sharga says. "Everybody I've talked to knows somebody who has been in their house for over a year and hasn't made a payment and still hasn't received a notice."
These repossessed properties will eventually find their way onto the market, adding to a still-elevated inventory and working to drag home prices lower. The inventory of unsold homes rose nearly 12 percent in April, to just over 4 million homes. Demand for mortgage loans, meanwhile, has sputtered following the expiration of the federal home buyer tax credit. This increase in bank repossessions "will have a depressing effect on home prices," Chen says.
But the housing outlook is not without hope. Sharga points to recent surveys from the
Still, the market will remain saturated with distressed properties for some time. "Those early-stage delinquencies that are starting to go down are on loans that were issued in the last couple of years -- and that's good. It means these loans are actually performing the way they are supposed to," he says. "But it won't really have a material impact on foreclosure numbers for another 12 to 18 months."
"There is definitely hope down the line, it is just that we have this big bulge of loans that are troubled and we have to work through them," Chen says. "With the large supply [and] weak demand, I think it will be probably 2012 before a lot of these homes are worked through."
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Home Repossessions Hit New Record High
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