Mortgage default notices shot up 33% in August from July, a dramatic turnaround from the downtrend reported just last month and the sharpest monthly increase since the start of the housing crisis in August 2007.
In its monthly foreclosure market report released Thursday, RealtyTrac said banks sent default notices to 78,880 homeowners nationwide, up from 59,516 in July; the surge was especially pronounced in California, where default notices increased 55%, as well as in Indiana and New Jersey, which saw 46% and 42% increases respectively.
The default notice is the first key foreclosure filing, preceding auctions and bank repossessions. The big increase in these filings therefore “foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process,” stated RealtyTrac CEO James Saccacio in its release.
Offering a more sanguine view of the gloomy report was Gregory Tsujimoto, who performs market research for John Burns Real Estate Consulting in Irvine, Calif., and views the data as reflecting more of a stall in an improving market than a new downtrend. Despite the sharp increase in monthly figures, Tsujimoto attaches more weight to an 18% decline in default notices on an annual basis, also found in Thursday’s RealtyTrac report.
“We have to recall that after a slowdown in robo-signing, there’s a ramping back up of processing foreclosures. That should clear through the distress” that is delaying recovery, Tsujimoto (left) says. Last fall, Bank of America, JP Morgan and GMAC suspended their foreclosures over allegations they robotically signed foreclosure documents en masse without properly notarizing and witnessing them correctly. Bank of America is now catching up on those foreclosures, up more than 200% in August over the previous month.
Tsujimoto calls the surge in default notices “a leading indicator for future foreclosures, which is not coming at a great time when measures of consumer confidence have ticked down.” But he says we need to address the backlog of distressed inventory and “vacant homes in the marketplace before we get true improvement.” The other key, he says, is “creating jobs to spur demand.”
Tsujimoto says the Texas real estate market has fared better than most because of its strong jobs market. Raleigh-Durham, N.C. and Washington, D.C. have also enjoyed jobs-based housing market stability. From a value perspective, he says Phoenix is an attractive market citing reset prices and improving employment.