Nearly five years removed from the mortgage crisis, the supply of foreclosed properties is a shell of its former self, as the nation's distressed property inventory continues to dwindle, based on newly released data.
In August, the U.S.' foreclosure supply fell by more than 25 percent, according to property analytics firm CoreLogic. Meanwhile, completed foreclosures dropped 20 percent on a year-over-year basis, totaling 36,000 during the month. In August of last year, 46,000 foreclosures were completed, and in September 2010 – the peak period for distressed property filings – the total reached in excess of 117,350. That puts August's total down nearly 70 percent over a span of 69 months.
Legacy loans more problematic
Frank Nothaft, CoreLogic chief economist, pointed out that mortgage performance continues to improve, but there are certain characteristics developing when comparing recently originated loans to legacy loans, or adjustable-rate mortgages made in the early to mid-2000s during the height of the housing bubble.
"Newly delinquent loans are at the lowest rates during the last two decades," Nothaft explained. "That reflects the tight underwriting and improved economy during the last few years. However, the foreclosure pipeline of legacy loans remains elevated."
He added that in the legacy loan segment, approximately 500,000 foreclosures have been completed, two times more than what's been the norm.
Real estate and economic experts attribute the foreclosure crisis to overly lax underwriting standards to subprime mortgage borrowers.
Serious delinquencies at lowest rate since January 2008
Conditions are vastly improved, particularly among serious mortgage delinquencies, or loans 90 or more days overdue. The rate in August fell 20 percent year-over-year to 1.3 million home loans, or 3.5 percent. That's the lowest serious delinquency rate in in over five and a half years.
Anand Nallathambi, CoreLogic president and CEO, noted that moving forward, affordability conditions are expected to improve, which should help keep foreclosure completions less common.
"In August, the housing market experienced solid and steady increases in sales, prices and performance and our preview data indicates those trends will continue in September," Nallathambi said. "Longer term, the recent increase in household formations and rapidly improving labor market for millennials will provide a demographic tailwind to the housing market and keep demand firm."
Still, the nation's distressed property inventory is plentiful enough for buyers aiming to become homeowners at a discount. In July, for instance, distressed sales accounted for nearly 1 in 10 homes sold, based on a separate report from CoreLogic.
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