Declining REO Sales May Push Foreclosure Inventory Higher

The pace of foreclosure activity in the U.S. remained unchanged in June with 60,000 completed foreclosures, the same number as in May but 25 percent lower than the June 2011 total of 80,000.   The number of pending foreclosures was also unchanged from May at 1.4 million homes or 3.4 percent of all homes with a mortgage and the year-over-year change was a single basis point decrease from 3.5 percent.  There were 1.5 million homes in the inventory a year earlier. The foreclosure inventory represents the share of mortgages homes that are in some stage of foreclosure.  

These figures were reported on Tuesday by CoreLogic in its National Foreclosure Report for June.  The company said that there have now been approximately 3.7 million completed foreclosures since the financial crisis began in September 2008.

"While completed foreclosures and real-estate owned (REO) sales virtually offset each other over the past four months, producing static levels of foreclosure inventory for most of this year, they are beginning to diverge again," Mark Fleming, chief economist for CoreLogic said.  "Over the last two months REO sales declined while completed foreclosures leveled out.  So we could see foreclosure inventory rising going forward."

"The decline in the flow of completed foreclosures to pre-financial crisis levels is more welcome news pointing to an emerging housing market recovery," according to Anand Nallathambi, CoreLogic's president and CEO.  "However, we believe even more can be done to reduce the inventory of foreclosures by decreasing the level of regulatory uncertainty and expanding alternatives to foreclosure."

On a state level there continue to be distinct differences between states using a judicial foreclosure process and those which do not.  The foreclosure inventory decreased or was unchanged on an annual basis in 24 of the 27 non-judicial foreclosure states (including Washington, DC) and in the three states where the rate increased the changes were 0.2 percent or less.  In the 24 judicial foreclosure states the rate increased in 10 in a range from 0.2 to 1.3 percent.  Over the past year the ratio of completed foreclosures to mortgages in the U.S. was 1 in 52.

The highest number of foreclosures over the 12 month period ending in June were in California (125,000), Florida (91,000), Michigan (58,000), Texas (56,000), and Georgia (55,000.)  These five states account for nearly half of all completed foreclosures in the country.

On a percentage basis the foreclosure inventory was highest in Florida (11.5 percent), New Jersey (6.5 percent), New York (5.1 percent), Illinois (5.0 percent), and Nevada (4.8 percent.)