JULY 2007

Foreclosures on the Rise

The latest U.S. Foreclosure Market Report from RealtyTrac revealed that, during May 2007, foreclosure filings in the nation (which include default notices, auction sale notices, and bank repossessions) climbed 19 percent from April 2007 and almost 90 percent from May 2006.

James J. Saccacio, chief executive officer of RealtyTrac, commented on the results, saying "[a]fter a barely perceptible dip in April, foreclosure activity roared back with a vengeance in May. Such strong activity in the midst of the typical spring buying season could foreshadow even higher foreclosure levels later in the year. Certainly not every community nationwide is seeing an increase in foreclosures, but foreclosed properties are becoming more commonplace and adding to the downward pressure on home prices in many areas."

Of the 176,137 foreclosure filings in the nation measured by RealtyTrac, the 10 states with the highest number of filings in May were: California, Florida, Ohio, Texas, Michigan, Georgia, Illinois, Colorado, Arizona, and Nevada. Of the top three states in foreclosure filings: California reported almost 40,000, marking the fifth straight month that the state had the highest number of filings in the country; Florida reported almost 22,000, an increase of 52 percent from the previous month and a 144 percent increase over May 2006; and Ohio's total for May was over 13,000 filings, marking the third highest number of filings in the nation for the third consecutive month.

On a filings per household basis, RealtyTrac reported a national foreclosure rate in May of one foreclosure filing for every 656 U.S. households. The 10 states recording the highest foreclosure rates in May were: Nevada, Colorado, California, Florida, Ohio, Arizona, Georgia, Michigan, Indiana, and Connecticut. Nevada's foreclosure rate in May was the highest in the nation for the fifth consecutive month and almost four times the national average. The table below shows the number of foreclosure filings by state and rankings for filings and rates.

A recent study by RealtyTrac revealed a geographic shift in foreclosure filings from the Rust Belt to the Sun Belt. For the three months ending June 15, the number one ZIP Code for foreclosure filings belonged to Cleveland. However, of the top 500 ZIP Codes in terms of foreclosure filings, 139 were in California and the second highest number (72) were in another sun-belt state—Florida. The drivers of foreclosures are different in the two regions. For rust-belt states, lower-than-average incomes and manufacturing industry job losses are the economic problems that have led to high foreclosure rates in states such as Michigan, Ohio, and Indiana. For sun-belt states such as California, Florida, Arizona, and Nevada, home-price appreciation attracted investors who contributed to quickly rising values. When the market cooled, these speculators contributed to a decline in prices by unloading their properties and adding to housing inventories. The Mortgage Bankers Association's chief economist expects foreclosures to peak in 2008.

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