There’s lots of good information in this morning’s release of RealtyTrac’s April Foreclosure Market Report and the associated Chicago foreclosure activity data. Most significantly the huge spike in activity that we saw in March was probably an anomaly, most likely the clearing of a huge backlog, because April was more in line with recent activity. Throwing March out it looks like things have leveled out for a while, though April came in at the high end of the recent range.
Looking at the details, defaults have ticked up a bit but bank repossessions are really running much higher than recently.
Bank repossessions also spiked at the national level as you can see in the graph below, which shows both foreclosure starts and completions (through repossession).
Daren Blomquist, vice president at RealtyTrac, commented on the spike in repossessions:
The REO increase in April was foreshadowed by a 23-month high in scheduled foreclosure auctions in October 2014. Many of those scheduled auctions are now taking place, and properties are going back to the foreclosing lender. Meanwhile we continue to see foreclosure starts decrease, and foreclosure starts nationwide are now running consistently below pre-crisis levels — indicating that the overall increase in foreclosure activity in April is a continuation of the clean-up phase of the last housing crisis, not the start of a new crisis.
While distressed sales typically have a stifling effect on the housing market, in this particular market an influx of distressed inventory could actually help stimulate sales during the spring and summer buying season as new listings become available, often in the middle to lower ranges of the market. Banks are liquidating these distressed properties in a seller’s market with a low supply of inventory for sale, which should help them sell quickly and at a price that is relatively close to full market value.
Speaking of REOs (repossessions or bank owned properties)…RealtyTrac provided some interesting data that indicates that bank owned properties in Chicago sell between 81 – 93% of fair market value. I’m sorry I can’t be more specific on that number but RealtyTrac doesn’t provide the data for Chicago but we do know that Chicago doesn’t fall into the top 10 or bottom ten price to value ratio cities, which allows us to narrow it down a bit.
Another interesting chart that RealtyTrac provided shows how long it takes to sell a bank owned property vs. a home in foreclosure but not bank owned. No surprise there’s a huge difference as you can see in the graph below. Also, sale time has recently dropped dramatically for bank owned properties – probably because of the extremely low inventory levels.
Chicago Shadow Inventory
The data on Chicago homes in some stage of foreclosure seems to confirm the view that the recent spike in activity is due to the clearing of a logjam in foreclosures. Note that the decline recently flattened out a few months ago but in april it got back on track with an almost 1800 unit drop, compared to 700 unit drops recently. That is consistent with the view that the banks cleared these homes out of inventory once they took possession of them.
#realestate #chicagorealestate #foreclosures
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