The improving housing market is reducing the number of homes headed for foreclosure. Third-quarter data from RealtyTrac shows that lenders initiated foreclosure on the fewest number of homes since 2006.
Foreclosure starts were down 39 percent from the third quarter of 2012. On an annual basis, foreclosure starts were down in 38 states. The slowdown is attributed to rising home prices, which move more homeowners out of negative equity; job growth; and fewer troubled mortgages.
Starting fewer and finishing more
Although fewer homes are entering the foreclosure process, lenders have been stepping up repossessions, resulting in a rise in the number of foreclosed properties. From second quarter to third, completed foreclosures rose 7 percent, according to RealtyTrac.
"My general take is that since home values are increasing, it now makes sense for banks to accelerate the repossession of homes and put the homes on the market as quickly as possible to minimize their carrying costs and losses," says John Walsh, president of Total Mortgage Services in Milford, Conn. "I also think the rise in home values is making it less worthwhile for people to let their homes go into foreclosure."
Foreclosures reached a peak in 2010 and have been declining since then. Walsh expects that trend to continue. "Since pretty much all signs point to a housing recovery that is accelerating, I think we will continue to see more normal foreclosure activity going forward."
Keep up with your wealth and mortgages and follow me on Twitter: @JudyMartel.
Get real-time rate quotes with Bankrate's Mortgage app.