Foreclosure filings â€” which include default notices, scheduled auctions, and bank repossessions â€” soared 9 percent in May from the previous month, RealtyTrac reports. The pick-up in foreclosures for the month marked the first monthly increase since January and had some in the housing industry saying that the â€œforeclosure wave,â€ as predicted, has finally made landfall.
Following a $26 billion mortgage settlement in April between the nationâ€™s five largest banks and state attorneys general, the industry had predicted that foreclosures would rise this summer. Banks had delayed processing some foreclosures during the settlement as they made new checks of their paperwork and overhauled their foreclosure procedures. Now, theyâ€™re quickening their pace.
Bank repossessions soared 7 percent in May, RealtyTrac reports. Foreclosure starts were also on the rise, jumping 12 percent from April, and were 16 percent higher than they were compared to May of last year.
"The jump in May foreclosure starts shows that it's going to be a bumpy ride down to the bottom of this foreclosure cycle," says Brandon Moore, CEO of RealtyTrac.
However, the number of short sales continues to grow, which may help lessen the foreclosure impact on overall home values that occurred in the past. The higher percentage of foreclosure starts in May will likely end up as short sales or auction sales rather than bank repossessions, says Moore.
â€œDisposing of distressed homes by pre-foreclosure sale can benefit lenders and servicers because pre-foreclosure homes sell at a higher average price point than bank-owned homes,â€ Moore says.
The average price of a pre-foreclosure home in the first quarter sold for more than $27,000 higher than the average price of a bank-owned home.