Foreclosure numbers rise, but aren't turning into repos

Foreclosure activity inched up closer to pre-pandemic pace in the third quarter, but a robust jobs market has kept repossessions at a minimum, according to real estate data solutions provider Attom. 

Between July and September, foreclosure filings, such as default notices, auctions or repossessions, were reported for 92,634 properties, or one in every 1,517, up almost 3% from 90,139 in the second quarter. Numbers were 104% higher compared to the same three months last year, when a foreclosure moratorium had just been lifted.

New foreclosure starts, meanwhile, totaled 67,249 in the third quarter, a 1% uptick from the prior three months and 167% above levels of a year ago. 

While numbers continue to rise, they have not yet surpassed the mark set before the pandemic, according to Rick Sharga, executive vice president of market intelligence for Attom. 

"Foreclosure activity is reflecting other aspects of the economy, as unemployment rates continue to be historically low, and mortgage delinquency rates are lower than they were before the COVID-19 outbreak," he said in a press release. 

Current economic trends and record levels of equity available to homeowners has led to fewer foreclosure notices turning into repossessions over the past several months when compared to historical numbers. Nearly three times more homes were repossessed by lenders in the second quarter of 2019 than in the same period this year, Sharga said. 

"We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction," Sharga said. 

Home equity among U.S. homeowners hit another record of $11.5 trillion at the end of the second quarter, according to mortgage technology and data provider Black Knight, but the value has likely fallen since. 

Only 10,515 U.S. properties ended up in repossession during the third quarter, up 18% from three months earlier and 39% from a year ago. The largest number occurred in Illinois, which had 1,331, followed by Michigan at 729 and New York at 695. Foreclosure completions dwindled as the quarter went on with 3,509 in September, down 11% from August.

California posted the most new starts, though, with 7,368, ahead of Florida at 6,671 and Texas with 6,217.

Overall, foreclosure filings were most prevalent during the third quarter in Illinois, where one in every 694 housing units received a notice, followed by Delaware with one in every 825, and  New Jersey at one in every 855.

The average length of time to complete the foreclosure process also decreased in the third quarter, falling approximately 7% to 885 days from 948 between April and June, and 4% year over year from 924.