By Octavio Nuiry
Home prices continue to rise in many major U.S. housing markets as tight inventory levels push prices upward. Amid the slow housing recovery, another indicator points to an improving real estate market: fewer foreclosures in US.
In March, foreclosure filings were initiated on 117,485 properties, down 23 percent from a year ago, and far fewer than the 360,149 foreclosure filings in July 2009, according to RealtyTrac. Bank initiated 37,987 default notices in March, while 50,658 properties moved to the auction block and 28,840 homes reverted to the banks as REOs.
With fewer underwater borrowers teetering on default, foreclosure activity should continue its downward trend. Nine million residential properties were seriously underwater in the first quarter, representing 17 percent of all properties with a mortgage, according to RealtyTrac.
“U.S. homeowners are continuing to recover equity lost during the Great Recession, but the pace of that recovering equity slowed in the first quarter, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac. “Slower price appreciation means the 9 million homeowners seriously underwater could still have a long road back to positive equity.
The first quarter negative equity numbers were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012. In the fourth quarter of 2013, 9.3 million residential properties representing 19 percent of all properties with a mortgage were seriously underwater, and in the first quarter of 2013 10.9 million residential properties representing 26 percent of all properties with a mortgage were seriously underwater. The recent peak in negative equity was the second quarter of 2012, when 12.8 million U.S. residential properties representing 29 percent of all properties with a mortgage were seriously underwater.
“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist noted. “But many distressed homeowners with equity may not realize they have equity and in some cases have vacated the property already, assuming that foreclosure is inevitable.”