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.