Foreclosures Exceed 1 Million Last Year, Expected to Grow in 2011
Foreclosures are expected to peak while prices bottom out in 2011 as the nation's housing crisis trudges into its fifth year.
Lenders repossessed more than 1 million homes in 2010, up 14 percent from the previous year and the most since 2005, according to a report released Thursday by RealtyTrac, a California-based company that tracks the foreclosure market.
“We will peak in foreclosures and probably bottom out in pricing, and that’s what we need to do in order to begin the recovery,” Rick Sharga, RealtyTrac’s senior vice president, said in an interview at Bloomberg headquarters in New York. “But it’s probably not going to feel good in the process.”
Foreclosures could rise by 20 percent this year while prices will likely drop by 5 percent as the market begins to make a turn toward recovery, Sharga said.
Housing market analysts expect it will take a minimum of two years for the market begin recovering and possibly as many as five years before the recovery roots. Foreclosures are expected to remain high as homeowners contend with stubborn unemployment, tougher standards to get a loan and falling home values.
A record 2.9 million households, or one in 45, received notices of default, auction or repossession in 2010, up about 2 percent from the prior year.
In December, 257,747 homes received at least one foreclosure-related notice, the lowest monthly total in 30 months. The number of notices fell 1.8 percent from November and 26.3 percent from December 2009, RealtyTrac said.
The slowdown during the last couple of months of they year is likely the result of major lenders halting foreclosures while they reviewed their processes and problems with robo-signers, those who signed off on paperwork without closely reviewing documents.
Upward of 250,000 foreclosure filings were delayed at the end of the year because of investigation into bank practices, according to RealtyTrac.
Attorneys general in all 50 states are investigating problems with the process. Firms including JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc. halted some repossessions as they reviewed their procedures.
Most banks have restarted the process, which could create a spike of foreclosures during the first three months of 2011, according to the report.
About 3 million homes have been repossessed since the housing boom ended in 2006, and that could rise to about 6 million by 2013, according to Sharga.
About 5 million borrowers are at least two months behind on their mortgages and more will miss payments as they struggle with job losses and loans worth more than their home's value, industry analysts forecast.
Price drops will force more borrowers under water on their mortgages with about 20 percent already owing more than their homes are worth.
Five states — California, Florida, Arizona, Illinois and Michigan — accounted for 51 percent of the filing total.
Georgia, Texas, Ohio, Nevada and New Jersey rounded out the top 10 for foreclosures, according to RealtyTrac.