Is the Wave of Foreclosures Over?
In a definite sign of a strengthening economy, the number of foreclosures nationally has dropped significantly. According to Attom Data Solutions, the third quarter of 2017 saw an impressive 13 percent decline in foreclosure filings, default notices, scheduled auctions, or bank repossessions from the previous quarter, and an even more impressive drop of 35 percent from a year ago. This represents the lowest level of foreclosures since the third quarter of 2006 – more than 11 years ago.
Current foreclosure rates are actually lower now than what was considered normal before the financial crisis of 2008. More specifically, the foreclosure rate is now 31 percent below the pre-recession average. Additionally, this is the fourth consecutive quarter where it has done so.
According to Daren Blomquist, senior vice president of at Attom Data Solutions another reason (in addition to a strengthening economy) is that, “Legacy foreclosures (foreclosures from loans originating just before the financial crisis) from the high-risk loans have largely been cleared out of the distressed market pipeline.” Blomquist adds, “Meanwhile loans originating during the housing boom of the last 5 years are posting foreclosure rates below historic averages.” The only exception being FHA loans originating in 2014. But even these are 55 percent below the peak in 2007.
According to CoreLogics latest Loan Performance Insight Report, “At a national level, 4.6 percent of mortgages in the U.S. were in some stage of delinquency (30 days or more past due including those in foreclosures) in July 2017. This represents a 0.9 percentage point year-over-year decline in the overall delinquency rate compared with July 2016 when it was 5.5 percent. According to the firm, this represents the lowest level since 2007.
Delving a little deeper, CoreLogic also differentiates between the levels of delinquency rates. For example, early stage delinquency (20-59 days past due) was 2 percent in July 2017, down from 2.3 percent in July 2016. And the serious delinquency rate (60-89 days past due) declined from 2.5 percent in July 2016 to 1.9 percent in July 2017.
As stated earlier, declining foreclosure and delinquency rates are a sign of a strengthening economy which in turn should give a boost to the real estate market.