By Alex Veiga
LOS ANGELES -- Fewer U.S. homes are completing the foreclosure process and ending up repossessed by banks because investors are increasingly buying up properties when they go on sale at public auction. The trend reflects a growing appetite among investors for buying homes before they exit the foreclosure process and end up on the market.
Some 37,775 homes nationwide completed the foreclosure process in October, down 1 percent from the previous month and a decline of 29 percent versus October last year, foreclosure listing firm RealtyTrac Inc. said Thursday. At the front end of the process, lenders initiated foreclosure action against 58,939 homes last month, an increase of 2 percent from September, but a drop of 34 percent from October 2012, the firm said.
Foreclosure starts have been down nationally on an annual basis for 15 months in a row, while home repossessions have fallen annually for 11 consecutive months. The decline has come about as more homeowners are keeping up with their mortgage payments. At the same time, the U.S. housing market has emerged from a deep slump, aided by rising home prices, steady job growth and fewer troubled loans dating back to the housing-bubble days.
"We're still firmly on the road back to normal foreclosure levels, but continue to see the foreclosure problem persist in areas that had delays in the foreclosure process," said Daren Blomquist, a vice president at RealtyTrac. Those areas generally include states such as Florida, New York and Illinois where the courts must sign off on foreclosures. Many properties that were delayed as state courts worked through a logjam of foreclosure cases got started on the foreclosure path earlier this year and got scheduled for public auction last month.
All told, 30,023 homes in states where the courts play a role in the foreclosure process were scheduled for public auction last month, an increase of 10 percent from September and up 7 percent from October 2012. Traditionally, most homes lined up for public auction ended up going back to lenders, opening the door for the properties to be placed on the market as sharply discounted foreclosed homes.
But the decline in completed foreclosures suggests many of the homes being auctioned are ending up purchased by investors. Many large investors are eager to buy homes at public auction, where buyers are required to pay cash. That means they don't have to compete against typical homebuyers who must finance the home purchase.
"You have an improving housing market so investors are back in the game," Blomquist said.
Blomquist anticipates that completed foreclosures will increase modestly in coming months in states where courts handle foreclosures, but adds that more of those properties could also end up sold to investors at public auctions. An average of about 40,000 homes have been taken back by lenders every month this year through October. That puts the nation on pace for just under 500,000 completed foreclosures this year, down from 671,251 last year.
Foreclosures peaked in 2010 at 1.05 million and have been declining ever since.
More about foreclosed homes:
Rate of Late Mortgage Payments Hits 5-Year Low
City Aims to Seize Mortgages of Homes Teetering Toward Foreclosure
SEE: Auctioned Detroit House Becomes a Dream Home
STATES WHERE FORECLOSURES TAKE THE LONGEST:
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