Foreclosure Filings Hit Four-Year Low

Last month's foreclosure filings, as counted by foreclosure marketer RealtyTrac, hit the lowest point in four years. Is the housing crises over?

Hardly.  Banks are still overloaded with bad loans, but RealtyTrac says they are simply waiting before beginning the foreclosure process.

“Foreclosure processing delays continue to mask the true face of the foreclosure situation,” said James J. Saccacio, RealtyTrac’s CEO. “Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month.”

By RealtyTrac's count, a total of 214,927 properties received default, auction or repossession notices last month. That's the lowest number since November 2007. Filings dropped 33 percent from a year earlier and 2 percent from April. One in 605 households got a notice in May.

This is part of a year-long trend. Foreclosure filings have fallen in the last eight straight months, following revelations that loan servicers broke rules by using robo-signers to process foreclosure documents. Banks began slamming on the brakes as they retooled their in-house processes.

Weak demand

Something else may be a work. There is such weak demand from buyers, banks may feel it is self-defeating to place even more foreclosed properties on the market. At some point, however, most industry analysts expect these homes to be put up for sale.

Meanwhile, an estimated 28 percent of mortgage-holders are now underwater on their loans, meaning they owe more than the house is worth. These homeowners are in the greatest danger of foreclosure, since they have little motivation to hold on.

High unemployment is also putting added pressure on homeowners, many of whom find they can no longer afford to make their payments.

As real estate is all about location, the foreclosure crisis continues to be centered in the same handful of states. Nevada had the highest rate of foreclosure per household again last month, with one in 103 getting a notice. Arizona was second, followed by California, Michigan, Utah, Georgia, Idaho, Florida, Illinois and Colorado.