Foreclosure notices surged last month in states where courts oversee home seizures, slowing the process and causing prices to lag behind in the U.S. housing recovery, according to RealtyTrac Inc.
Across the country, 152,500 properties received default, auction and repossession notices in March, a decline of 1 percent from the previous month and 23 percent from a year earlier, the Irvine, California-based data seller said in a report. So-called judicial states such as New York and Maryland where more time is needed to take property from delinquent borrowers had a 4 percent gain from March 2012. Notices fell 44 percent in non-judicial states, RealtyTrac said.
“At this point, the housing market is healing itself and there’s not a lot you can do if a foreclosure is inevitable,” said Paul Willen, senior economist at the Federal Reserve Bank of Boston. “It’s in the best interests of lenders and the community to get the home in the hands of a new owner.”
Judicial states showed “late-blooming” foreclosures in default data from March, Daren Blomquist, RealtyTrac’s vice president, said in an interview. First-time notices tripled in New York and soared 193 percent in Maryland, the biggest gains nationally from a year earlier, according to RealtyTrac.
“We’re at an artificially low level of inventory right now, so any increase in foreclosure starts would be a welcome sign, at least in the investment community,” Jack BeVier, a partner at Baltimore-based Dominion Group, which buys and renovates homes, said in a telephone interview. “People are more optimistic about the housing rebound and ready to come off the sidelines, but there’s not much to choose from.”
Fed efforts to stimulate the U.S. economy by pushing down borrowing costs have fueled demand for home purchases amid a limited inventory of properties on the market. The supply of listed properties rose in February after a 12-year low the previous month, National Association of Realtors data show.
The S&P/Case-Shiller home-price index rose 8.1 percent in January, the biggest annual gain since June 2006, as all 20 cities in the measure showed increases. JPMorgan Chase & Co. last month more than doubled its U.S. housing forecast for the year to a 7 percent jump, while Bank of America Corp. predicted an 8 percent advance. Consumer confidence and greater mortgage availability is also boosting housing, Willen said.
“There are reinforcing things going on, and our view is the main driver of house prices is the belief in where the prices are going,” said Willen, also a policy adviser at the Boston Fed.
Cities in non-judicial states showed the greatest appreciation in values in January, led by annual gains of 23 percent in Phoenix, 18 percent in San Francisco and 15 percent in Las Vegas, according to the S&P/Case-Shiller index. The smallest increases were in New York, up 0.6 percent, and Chicago, up 3.3 percent, both located in judicial states.
New laws passed in non-judicial states, designed to prevent repossessions as defaults mounted, haven’t had the desired effect of protecting borrowers, Blomquist said. In Washington, auction notices that begin the process in that state rose 154 percent in March, despite 2011 legislation requiring banks to offer mediation and reduce foreclosures, he said.
“It’s almost as if non-judicial states are making it harder to foreclose,” Blomquist said. “In some states, policy makers are fighting the last war, and the war is largely over.”
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