Real Estate News

Foreclosure starts ramp up by 12 percent in third quarter

Published: 19 Nov 2015

The fourth quarter got off to an inauspicious start both for homeowners and the residential real estate market in general, as foreclosure numbers rose by double-digit figures, according to newly released data published by RealtyTrac.

In October, more people began the distressed property filing process, as foreclosure starts jumped by 12 percent from September, RealtyTrac reported. That's the largest month-over-month uptick in starts in over four years.

The surge in foreclosure starts signaled a 6 percent overall monthly increase in foreclosures, as more than 115,100 default notices, scheduled auctions and bank repossessions took place over the 31-day period. That's the equivalent of 1 in approximately 1,150 housing units with a mortgage.

Daren Blomquist, RealtyTrac vice president, indicated that the higher foreclosure total wasn't unexpected, given how previous Octobers have fared.

"We've seen a seasonal increase in foreclosure starts in October for the past five consecutive years," Blomquist referenced. "So it's not too surprising to see the monthly increase this October."

He cautioned, however, that the 12 percent growth was more than double the 5 percent monthly average, so it bears watching to see if it heads higher. Doing so would suggest overly tight affordability conditions. At present, though, the upward trend is most likely the result of foreclosures finally entering the pipeline, having already been designated distressed properties several months ago.

The prevalence of foreclosures is largely a function of home prices as well as mortgage rates. In the third quarter, the national median existing single-family residence went for $229,000, up more than 5 percent from the same period last year, according to the National Association of Realtors. That estimate doesn't include closing costs.

For the last two weeks, mortgage rates have risen, though they still remain at historically low levels. During the seven-day period ending Nov. 12, 30-year fixed rate mortgages averaged 3.9 percent, up from 3.8 percent the week prior, government-sponsored enterprise Freddie Mac reported from its most recent Primary Mortgage Market Survey. A year ago, the average was slightly over 4 percent.