Home repossessions in the U.S. jumped 11% in May after declining for the previous five months as rising prices and limited inventory for sale across the country spurred banks to complete foreclosures.
Lenders took back 38,946 homes, up from 34,997 in April, according to Irvine, California-based data firm RealtyTrac, which tracks notices of default, auction and seizures. Thirty-three states had increases in the number of homes repossessed, RealtyTrac said in a report today.
Banks are more willing to move to the final stage of foreclosure because there is sufficient demand and prices are improving, said Eric Workman of Tinley Park, Illinois-based Mack Cos., which aggregates single-family rental homes and resells them to individuals and institutional investors. U.S. home prices advanced almost 11% in the year through March, the biggest 12-month gain since April 2006, according to the S&P/Case-Shiller index of values in 20 cities.
“For a very long period of time, the market in general and specifically banks were unsure of what these assets were valued at,” Workman, vice president of sales and marketing at Mack, said in a telephone interview. “With increasing stability of the economy and housing prices throughout the U.S., these banks and sellers are getting much more comfortable with the value of their properties.”
Private-equity firms, hedge funds and individuals are all buying foreclosed or distressed homes to turn into rental properties as prices remain 28% below their 2006 peak. Companies including Blackstone Group LP, which has invested more than $5 billion to buy almost 30,000 homes, and Colony American Homes Inc., which owns more than 12,000 properties, are helping to increase prices in areas hit hard by the real estate crash by draining the market of inventory as low borrowing costs and improving employment fuel demand from buyers.
The average rate for a 30-year fixed mortgage climbed to 3.98% from 3.91% last week, McLean, Virginia-based Freddie Mac said in a statement today. While that’s the highest in 14-months, its down from 6.8% almost seven years ago before the housing crash.
“There are plenty of companies out there that will buy assets throughout the range of condition because the demand for finished quality inventory is so high,” Workman said.
Metropolitan areas that experienced the brunt of the housing bust and the most foreclosures have experienced some of the biggest rebounds. Median home prices in Phoenix soared 21% in May from a year earlier to $175,236, followed by Tampa, Florida, which was up 20% to $118,000; Riverside- San Bernardino, California, up 18% to $220,000; and Miami, up 16% to $160,000, according to RealtyTrac.