Though experts caution that the nation's crippling foreclosure epidemic is far from cured, new data reveal the carnage of the housing bust is easing thanks to rising home prices and efforts by banks and servicers to pursue alternatives to foreclosure.
Bank repossessions fell 11 percent from December 2012 and were almost 30 percent lower than figures reported in February 2012, foreclosure listing firm RealtyTrac Inc. said Thursday. That's the lowest level since September 2007.
Overall, about 45,000 homes were foreclosed on in February, less than half the number recorded when repossessions peaked in March 2010. The foreclosure rate still remains more than double what RealtyTrac considers healthy—about 20,000 foreclosures per month—but the worst of the crisis has passed, according to Daren Blomquist, vice president at RealtyTrac.
"At a high level the U.S. foreclosure inferno has been effectively contained and should be reduced to a slow burn in the next two years," he said in a statement.
Several factors are contributing to the overall decline in foreclosures and repossessions. A strengthening labor market—the economy added 236,000 jobs in February—plus rock-bottom low mortgage rates are raising the floor on housing demand. That, coupled with a record low inventory of homes for sale, is fueling a sustained increase in home prices, bringing more homeowners out of the red when it comes to their mortgages and away from the brink of foreclosure.
According to data firm CoreLogic, 1.4 million homeowners who had been underwater on their mortgages—meaning they owed more than their home was worth—moved into positive equity territory in the first nine months of 2012.
Higher home prices have also given banks and servicers an incentive to explore alternatives to foreclosure. A low supply of homes for sale has created a sellers' market in many parts of the country where even bank-owned homes and foreclosures—which usually sell at a significant discount—are being bid up.
But despite the fact that overall repossessions declined both on an annual and monthly basis in the majority of states, including foreclosure hotbeds such as Georgia and California, Blomquist noted that some states continue to struggle with scorching foreclosure rates. The backlog building in states such as Washington and Maryland will likely translate into more repossessions later this year as cases make their way through the system, he adds.
"Dangerous foreclosure flare-ups are still popping up in states where foreclosures have been delayed by a lengthy court process or by new legislation making it more difficult to foreclose outside of the court system."