April’s foreclosure numbers are just beginning to climb incrementally from historic lows.
Some Indications that Foreclosure Pipeline Building in April
Daren Blomquist, vice president of market economics with the marketplace for distressed properties, Auction.com, shared a foreclosure market update last week at an event hosted by ATTOM last week. Blomquist said, “We are going to be continuing to see these (foreclosure) numbers rise in the coming months.”
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(Please read the article titled “Home Price Growth Reaccelerates in February” and the companion foreclosure market data as of February 2022 in that article posted in this week’s calendar.)
Blomquist said that foreclosure activity continues to remain at historically low levels BUT that there are signs of more distressed homes coming onto the market.
Signs of More Distress
According to Blomquist, there were some 345,000 properties that were delinquent or in foreclosure but not in a loss mitigation program as of February 22, 2022. These 345,000 properties represent a jump of approximately +55% compared with July 2021.
Blomquist said, “These are high risk loans. A lot of them unfortunately are going to make their way to foreclosure.”
Blomquist continued. “It’s a relatively small number here, somewhere from 345,000 to 500,000 really high-risk loans…but it’s a growing number. It’s something to keep our eyes on. And it’s not going to be a surprise when we see the foreclosure numbers starting to rise.”
Where Foreclosures Are Rising
During April, scheduled foreclosure auctions jumped to 65% of pre-pandemic levels in Georgia, 63% in Texas and 56% in Virginia.
Other high foreclosure-volume states included California, Florida and Illinois, according to Blomquist.
States with the lowest foreclosure auction volume compared with pre-pandemic levels included:
- Utah – 8%
- New Hampshire – 9%
- Oregon – 14%
Return on investment (ROI) excluding rehab costs was best in the Midwest during 2019 and 2020 and the lowest in the West at 51.8% where the cost of buying foreclosure homes was the highest.
Foreclosure Activity Remains Historically Low
“The forbearance program was incredibly successful,” said Blomquist. “Those are folks that have been removed from forbearance or have exited forbearance and are still delinquent but aren’t under some sort of loss mitigation program.”
Foreclosure starts in January 2022 increased +176% y/y while remaining -39% below pre-pandemic levels from February 2020 and -59% below January 2020.
Foreclosure Forecasts
There are essentially two foreclosure forecasts, according to Blomquist. One scenario reflects a slow and steady increase in foreclosures if home prices remain stable. Such price stability, according to industry experts, would see foreclosure activity leveling out in 2027 at approximately 225,000 foreclosures.
The second foreclosure forecast reflects a scenario in which home prices would “correct” or decline. In that case, experts would expect foreclosure activity to climb more quickly but not nearly as quickly as foreclosures spiked from 2006-2020.
In either scenario, Blomquist said that foreclosure activity would continue to remain below Great Recession levels.
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Thanks to Auction.com, ATTOM and Inman.
