Amid the continuing epic decline in foreclosure inventory, there was one notable hiccup in CoreLogic’s September 2015 National Foreclosure Report released on Tuesday—foreclosure completions spiked by nearly 50 percent.
The number of completed foreclosures surged from 37,000 in August up to 55,000 in September, an increase of 49.5 percent, largely due to an annual public auctioning of thousands of tax-foreclosed properties in Wayne County, Michigan, where Detroit is the county seat, according to CoreLogic. By comparison, foreclosure completions averaged about 21,000 per month in the pre-recession years from 2000 to 2006.
The substantial monthly leap in foreclosure completions is just a one-time event, according to CoreLogic Chief Economist Frank Nothaft, and the number of completed foreclosures should return to its pre-September 2015 level in October; he noted that completed foreclosures were down by more than 17 percent year-over-year in September.
"The spike in September is just due to the Wayne County tax auctions," Nothaft said. "It should not continue into October. You could also note that while there was an increase from August to September, completed foreclosures fell in September when compared with a year ago. The tax auctions will not affect the foreclosure inventories as I believe the tax foreclosures are not counted in the foreclosure inventory."
Foreclosure completions paint a much more accurate picture of the foreclosure crisis because they reflect the total number of homes actually lost to foreclosure, as opposed to foreclosure starts or foreclosure inventory, since many of those homes avoid foreclosure through the loss mitigation process. While the 55,000 completed foreclosures in September is elevated compared to August and the immediately preceding months, it is still 17.6 percent lower than September 2014’s total of completed foreclosures (67,000) and 52.8 percent lower than the monthly peak of 117,438 in September 2010. Since the crisis began in 2008, approximately 6 million homes have been lost to foreclosure; since homeownership rates peaked in 2004, approximately 8 million homes have been lost.
Aside from the monthly spike in foreclosure completions, all other foreclosure-related metrics continued their steep declines and are at or below pre-recession levels. The number of seriously delinquent mortgages, which are those either 90 days or more overdue or in foreclosure or REO, dropped by 21.2 percent year-over-year in September down to 1.3 million properties (3.4 percent of all residential mortgages nationwide). It is the lowest rate for serious delinquent mortgages since December 2007.
Foreclosure inventory, defined as mortgage loans in any state of foreclosure, tumbled by 24.3 percent year-over-year in September down to 1.2 percent, or 470,000 homes (compared with 1.6 percent, or 621,000, in September 2014). The foreclosure rate in September 2015 was also the lowest it has been since December 2007. September 2015 represented the 47th consecutive month that foreclosure inventory declined year-over-year.
"The rate of delinquencies continues to drop back closer to historic norms powered by improved economic conditions and tighter post-recession underwriting standards," said Anand Nallathambi, president and CEO of CoreLogic. "As we head into 2016, based on almost every major metric, the fundamentals underpinning the housing market are healthier than any time since 2007."
The sum of completed foreclosures for the 12-month period ending September 30, 2015, totaled 494,000, compared with 612,000 for the 12-month period ending September 30, 2014. Though Florida accounted for 91,000 of those completed foreclosures in the past year, there have been vast improvements in the Sunshine State. For the 12-month period ending September 2014, there were 120,000 completed foreclosures in Florida. The foreclosure inventory rate declined by 42 percent over the year in September 2015, from 4.4 percent down to 2.6 percent.
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