Foreclosure Inventory Fell 34 Percent in 2014, but January Repos Add New Starts

Foreclosures in the national inventory fell to about 550,000 in December, a 38 month decline, but the New Year may break that pattern as banks ended their traditional holiday grace periods with a 55 percent increase in repossessions.

The national foreclosure inventory fell by 34.3 percent year over year in December 2014 to approximately 552,000 homes, or 1.4 percent of all homes with a mortgage, down from 840,000, or 2.1 percent, in December 2013. This marks 38 months of continuous year-over-year declines in the inventory of foreclosed homes, including 23 straight months of declines greater than 20 percent, as shown in Figure 1. Also in December 2014, the 12-month sum of completed foreclosures continued to decline, dropping 14.9 percent from a year ago to 563,000. The seriously delinquent inventory fell to 1.6 million loans, a 21.6-percent decline from December 2013, CoreLogic reported.

The five states with the largest year-over-year drop in the foreclosure inventory were: Utah (-48.8 percent), Florida (-48.6 percent), Maine (-45.9 percent), Idaho (-45.1 percent) and Iowa (-43.4 percent). All 50 states posted declines in the foreclosure inventory from December 2013, with 45 states showing decreases of more than 20 percent. Only the District of Columbia (+21.7 percent) experienced a year-over-year increase in the foreclosure inventory. As such, some of the country’s largest banks have been working on a legislative fix to facilitate a faster foreclosure process in D.C.

Judicial foreclosure states¹, on average, continue to have higher foreclosure rates than non-judicial states, averaging 2.4 percent and 0.7 percent, respectively, in December 2014. Figure 2 shows foreclosure rates for judicial states and non-judicial states. The foreclosure rate for judicial states peaked in February 2012 at 5.3 percent, and had fallen more than half as of December 2014. Non-judicial states experienced foreclosure rates peaking a full year earlier (in January 2011), and were about one-fourth of that peak value, or 0.7 percent, in December 2014.

The New Year started out with a bang as bank repossessions soared 55 percent from December and 23 percent from January 2014, according to RealtyTrac.   Total foreclosures were reported on 119,888 U.S. properties in January, an increase of 5 percent from the previous month but still down 4 percent from a year ago.

The 5 percent monthly increase was driven primarily by a 55 percent monthly jump in bank repossessions (REOs) to a 15-month high. A total of 37,292 U.S. properties were repossessed by lenders in January, up 23 percent from a year ago to the highest monthly total since October 2013.

“The year-over-year increase in REOs in January was the first annual increase nationwide following 25 consecutive months of declines, getting the foreclosure spring cleaning we anticipated in our last foreclosure report off to an early start in 2015,” said Daren Blomquist, vice president at RealtyTrac. “Meanwhile, the number of future foreclosure auctions scheduled in January continued to increase in many states, foreshadowing more foreclosure spring cleaning to come in the next several months in those states.”

Twenty-one states posted a year-over-year increase in scheduled foreclosure auctions in January, including Massachusetts (up 268 percent), New Jersey (up 125 percent), North Carolina (up 111 percent), New York (up 79 percent to a 55-month high), Missouri (up 74 percent to a 29-month high), California (up 43 percent to a 22-month high), Arizona (up 37 percent to a 20-month high), Oregon (up 29 percent), and Washington (up 13 percent).