RealtyTrac lowered its projection for home seizures in 2012 to 700,000 from 1 million, Blomquist said. While repossessions were down for the U.S. in the second quarter, many states that require court approval for foreclosures are seeing increases, Blomquist said. They jumped 45 percent in Illinois and 32 percent in Florida, he said.
Foreclosure starts -- notices of default or scheduled auctions -- increased in 31 states in the second quarter from a year earlier. For June, California had an 18 percent increase in starts, which helped boost the state’s foreclosure rate for the month to the highest in the nation for the first time since RealtyTrac began issuing its report in January 2005.
The foreclosure process in the U.S. increased to an average of 378 days in the second quarter, the highest in records dating back to 2007, RealtyTrac said. In New York, the state with the slowest process, the average time to foreclose was 1,001 days, down 5 percent from the first quarter. The average time to foreclose dropped 3 percent in New Jersey, the state with the second-longest process.
“As lenders are filtering through portfolios of distressed loans, there’s a certain batch of those that they are deeming aren’t a good fit for a loan modification, refinancing, or even short sale and those are the ones they’re pushing through,” Blomquist said.
The homes that do eventually end up in foreclosure may initially spur another drop in prices as the inventory reaches the market, said Mark Zandi, chief economist of Moody’s Analytics Inc. in West Chester, Pennsylvania. He predicts that home prices will decline 1 percent this year and increase by 1 percent in 2013.
“More price weakness could ignite more defaults as more underwater homeowners think that prices aren’t going to rise anytime soon,” Zandi said yesterday in an e-mail. “The threat is that a vicious cycle is re-ignited. I don’t expect this to happen, but it is a risk.”
Another dip in home prices could push more homeowners underwater just as a recovery was starting to take hold. In the first quarter, about 11.4 million properties, or 23.7 percent of homes with a mortgage, had negative equity, CoreLogic said in a report today. That was down from 12.1 million, or 25.2 percent, in the fourth quarter, as prices began to rise in hard hit areas such as Arizona, the Santa Ana, California-based company said.
Working through the inventory is still crucial to a sustained rebound, Zandi said.
“It will hurt a bit over the next six to 12 months, but it is necessary to get housing and the economy on a solid foundation,” he said.