U.S. Home Foreclosures Drop in June, but Spike Is Likely
U.S. home foreclosures fell in June after jumping to a 30-month peak in May, but default rates will escalate as a horde of mortgages resets at higher loan rates, real estate data firm RealtyTrac said Thursday.
"The outlook isn't terribly optimistic for the rest of this year," Rick Sharga, RealtyTrac's vice president of marketing, said in an interview.
"There are, depending on whose numbers you believe, somewhere between $600 million and $1 billion worth of adjustable-rate mortgages that are going to reset in the second half," he said.
"We anticipate a fair number of those are going to go into default, so we really do expect probably to see another spike in the Fall" for foreclosures.
June's downturn in filings was broad-based, with 33 states reporting monthly decreases, but the drop may be a leveling off after a large rise in May, according to RealtyTrac.
"What we don't know is if that's a one-month blip or if it's going to continue," Sharga said. When foreclosure filings start rising again, "we suspect that the states that have had the most severe problems will probably continue to be the ones with the most severe problems for the rest of the year, barring any unforeseen calamities in some of the other states."
RealtyTrac's foreclosure filing rate represents default notices, auction sale notices and bank repossessions.
Unemployment, Speculative Buyers, Cooling Markets
Nevada's foreclosure rate, with one filing in June for every 175 households, topped the list for the sixth straight month and was more than four times the national average. The state's foreclosure filings dropped by 10% from May but remained three times the year-earlier level.
California had the second-highest and Colorado the third-highest foreclosure rates. Florida, Arizona, Ohio, Michigan, Georgia, Connecticut and Indiana rounded out the list of the 10 states with the highest foreclosure rates in June.
"In states like Florida and Nevada, what you're seeing is the fallout from an awful lot of speculative buying. You have investors that have had high-risk purchases go south on them,"
"In states like Michigan, Ohio and Indiana, the foreclosure rates are driven largely by higher-than-average unemployment rates."
California's downturn is correcting from an extremely hot real estate market. Foreclosures are mounting there also because of a high concentration of subprime home loans to struggling borrowers, and also above-average mortgage fraud, according to Sharga. Subprime loans are extended to borrowers with spotty credit histories.
As for the total amount of foreclosure filings, the largest were in California, Florida and Ohio, RealtyTrac said.
Florida reported 21,035 filings during the month, a 3% drop from May but still more than twice the number in June 2006. The state's foreclosure rate of one filing for every 347 households was more than twice the national average and ranked fourth-highest among all the states.
The other seven states with the biggest foreclosure filing amounts were Michigan, Texas, Georgia, Illinois, Arizona, Colorado and New Jersey.
Six California cities dominated the 10 metropolitan areas with the highest foreclosure rates in June. The four at the top of that list -- Stockton, Merced, Modesto and Riverside-San Bernardino -- posted rates more than five times the national average.
Las Vegas's foreclosure rate of one filing for every 138 households put it in fifth place. Greeley, Colorado, Detroit and Miami were among the cities with the highest foreclosure rates last month.