Foreclosure activity during the third quarter dropped 13 percent from the previous quarter and 35 percent from a year ago to its lowest level since the second quarter of 2006, according to ATTOM Data Solutions.
ATTOM’s Q3 2017 U.S. Foreclosure Market Report found a total of 191,824 U.S. properties with foreclosure filings, which includes default notices, scheduled auctions and bank repossessions.
“Legacy foreclosures from the high-risk loans originated between 2004 and 2008 have largely been cleared out of the distressed market pipeline,” ATTOM Data Solutions Senior Vice President Daren Blomquist said in a release. “Meanwhile loans originated during the housing boom of the last five years are posting foreclosure rates below historic averages, with the notable exception of FHA loans originated in 2014, which have the highest foreclosure rate of any FHA loan vintage since 2009 — 29 percent above the historic average for FHA loans although still 55 percent below the peak in 2007.
“Elevated foreclosure rates on 2014 vintage FHA loans reflect a gradual loosening of credit as the sustained housing boom is slowly bolstering confidence and increasing risk tolerance in the real estate market,” Blomquist added. “This trend also explains increasing foreclosure starts in the third quarter in some of the nation’s hottest housing markets, counter to the national trend. If we see this pattern continue for 2015- and 2016-originated loans as those vintages age, we would expect to see a more widespread — although still relatively modest — lift in foreclosure activity in the next few years.”
ATTOM found that foreclosure starts were down nationwide during the third quarter, but up in 24 percent of local markets. Lenders initiated the foreclosure process on 93,724 U.S. properties in the third quarter, down 7 percent from the previous quarter and down 16 percent from a year ago.
Nearly one quarter of the metropolitan areas analyzed by ATTOM posted year-over-year increases in foreclosure starts in the third quarter, including Dallas-Fort Worth (6 percent); Denver (12 percent); Cincinnati (5 percent ); Cleveland; (29 percent); and Columbus, Ohio (23 percent).
Other metropolitan areas with year-over-year increases in foreclosure starts were Austin, Texas (29 percent); Nashville (17 percent); Milwaukee (97 percent); Oklahoma City (34 percent); and Louisville, Kentucky (up 27 percent).
ATTOM said foreclosure activity was below pre-recession levels in 57 percent of metropolitan areas, including Los Angeles (55 percent); Chicago (20 percent); Dallas (77 percent); Houston (63 percent); and Miami (51 percent).
“Foreclosure activity in the greater Seattle area continues to trend lower and is now at levels not seen since this this report was started,” Windermere Real Estate Chief Economist Matthew Gardner said. “The market remains starved for inventory which is pushing up prices well above average rates. As such, almost all housing units that were in negative equity have seen values rebound, which is why foreclosure activity has dropped to such low levels.
“As long as the regional economy continues to flourish, I do not expect to see foreclosures rise. That said, home price growth is starting to negatively impact affordability, and this is becoming troublesome,” Gardner added. “Any slowdown in the local economy could lead to an increase in foreclosure activity, but nothing close to the levels seen during the housing recession.”
Foreclosure activity was above pre-recession levels in 94 metropolitan areas, ATTOM said. Those areas included New York (57 percent); Philadelphia (50 percent); Washington, D.C. (44 percent); Baltimore (256 percent); and Virginia Beach (371 percent above).
ATTOM said the highest foreclosure rates during the third quarter were in Atlantic City, Trenton, N.J., and Cleveland. The states with the highest foreclosure rates were New Jersey, Delaware, Maryland, Illinois and Ohio.