Foreclosure rate eases, but remains very high

06.11.09
By Sarah Beldo

The rate of foreclosure may have moderated slightly last month, but the near record-high figures mean there is little cause for celebration.

According to RealtyTrac, some 321,480 American properties received foreclosure filings - including default notices, scheduled auctions and bank repossessions - in May.

Although that is a 6 percent decrease from April's totals, the level still marks the third-highest month for foreclosures on record and the third consecutive month in which filings surpassed 300,000.  Current foreclosure rates are 18 percent higher than in May 2008.

James J. Saccacio, CEO of RealtyTrac, said that defaults and foreclosure auctions fell month-on-month, but bank repossessions (REOs) increased by 2 percent.

"We expect REO activity to spike in the coming months as foreclosure delays and moratoria implemented by various state laws come to an end," he added.

A number of states had placed a temporary halt on foreclosure activity while the Obama administration worked out its plans to help distressed homeowners, but these initiatives ended in March, sending several homes back into the foreclosure process.

Meanwhile, the large numbers of foreclosures on the market have been driving down average house prices in the hardest-hit states, potentially opening up opportunities for homebuyers with good credit scores.

Still, with the average interest rate on a 30-year fixed-rate mortgage rate slowly climbing from record lows seen in the past couple of months, some buyers have been shying away from the market.

Experts say that if the demand for buying foreclosed properties tails off, it could have a ripple effect by lowering house prices, putting more pressure on existing homeowners and ultimately bringing more families close to foreclosure.

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The large numbers of foreclosures on the market have been driving down average house prices.