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Foreclosure Inventory a Hurdle for New Home Construction

by devteam December 5th, 2014 | Share

Completed foreclosure droppedrnprecipitously in October compared to September, although they were down to arnsignificantly lesser extent from a year earlier.  While the foreclosure crisis is no longerrnfront-page news, CoreLogic’s October National Foreclosure Report, releasedrntoday points out that completed foreclosures in October were nearly double thernnumber in more “normal” times and are a major factor inhibiting a return tornnormal levels of new home construction.</p

Duringrnthe month there were 41,000 completed foreclosures nationally compared torn62,000 in September, a -34.1 percent change. rnThe October number was down 14,000 or 26.4 percent from a year earlierrnand was 65 percent below the peak of completed foreclosures in September 2010.  It was the 25th month of doublerndigit year-over-year declines in therninventory of foreclosed homes.</p

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Still,rnCoreLogic points out that from 2000 to 2006, before the decline in the housingrnmarket, completed foreclosures averaged 21,000 per month.  Since 2008 there have been approximately 5.3rnhouses repossessed by lenders. </p

The foreclosure inventory, thernnumber of homes in some stage of foreclosure, numbered 605,000 units in October</bcompared to 875,000 a year earlier, a decrease of 30.9 percent.  October is the 36th consecutivernmonth in which the inventory has declined and it was down 2.1 percent comparedrnto the previous month.  The foreclosurerninventory represents 1.6 percent of all homes nationwide with a mortgage, downrnfrom 2.1 percent in September and 2.2 percent in October 2013.  The October inventory rate is the lowestrnsince May 2008.</p

“While there has been a largernimprovement in the reduction of foreclosure inventory, completed foreclosuresrnremain high and serve as one of the obstacles to new single-familyrnconstruction,” said Sam Khater, deputy chief economist for CoreLogic.rn”Until the flow of completed foreclosures declines to normal levels,rnnew-home construction will not pick up because builders have little incentivernto compete with foreclosure stock.” </p

CoreLogic president and CEO AnandrnNallathambi pointed out that not only is the foreclosure inventory at a new lowrnbut seriously delinquent loans are also tending down.  “At current rates, we can expect thernforeclosure inventory to slip below 500,000 units during 2015,” he said.</p

Every state but West Virginia andrnthe District of Columbia posted double-digit declines in foreclosure inventoryrnyear over year and in 19 states these were greater than 30 percent.  The largest decreases were in Florida (44.9rnpercent) and Utah (41.6 percent.)  WestrnVirginia posted the smallest change, -8.9 percent while and the District ofrnColumbia’s inventory increased 17.3 percent. </p

The five states with the highestrnnumber of completed foreclosures for the 12 months ending in October 2014 were:rnFlorida (118,000), Michigan (45,000), Texas (36,000), California (29,000) andrnGeorgia (28,000).These five states accounted for almost half of all completedrnforeclosures nationally.</p

The five states with the highestrnforeclosure inventory as a percentage of all mortgaged homes were: New Jerseyrn(5.5 percent), Florida (4.1 percent), New York (4.1 percent), Hawaii (2.9rnpercent) and Maine (2.6 percent).  Allrnfive are judicial foreclosure states.</p

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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