July 14, 2011 / 4:27 AM / in 6 years

Foreclosures resume rise in June

3 Min Read

<p>A realtor and bank-owned sign is displayed near a house for sale in Phoenix, Arizona, January 4, 2011.Joshua Lott</p>

NEW YORK (Reuters) - The number of U.S. homes that received foreclosure filings rose in June for the first time in three months, a survey said on Thursday, representing a small step toward clearing the housing market backlog.

Notices of default, auction sale or bank repossession were sent to 222,740 properties in June, a 4 percent increase over May, real estate data firm RealtyTrac said.

"An increase in home sales could be prompting banks to foreclose and replenish the market," said Rick Sharga, vice president of marketing at RealtyTrac.

Banks had slowed foreclosures, in part because they were worried about a flood of homes hitting the market and depressing prices and also as a result of a scandal involving alleged irregularities in their processing, Sharga said.

"It may sound counterintuitive to say that because foreclosures are being delayed, the economic recovery is being delayed, but in fact that is happening."

However, the month-to-month increase is a drop in the bucket according to Sharga, who has pushed out his forecast for a revival in housing prices to 2015 or 2016 from a previous estimate of 2014.

The number of homes receiving foreclosure filings in the first six months of 2011 dropped by a quarter over the last half of 2010 and by 29 percent over the same period last year to 1,170,402 homes. One in 111 homes received at least one foreclosure filing in the first six months of this year.

Second-quarter data also showed a decrease in foreclosure filings, with only 608,235 receiving notices, the lowest since the fourth quarter of 2007.

Sharga said the housing market is likely to see 1 million fewer foreclosures this year than needed to hit a healthy rate of sales of distressed properties.

Sales of previously owned U.S. homes hit a six-month low in May and supply rose, pointing to still-struggling housing market.

Foreclosures and short sales -- which typically occur at about 20 percent below market value -- accounted for about a third of transactions in May, down from 37 percent in April.

Nevada again had the highest foreclosure rate among states in the first half of the year with one in 21 homes receiving foreclosure filings.

California kept its status as the state with the highest number of homes receiving foreclosure filings -- 263,500 over the first six months of 2011. That is a decrease of 13 percent over the previous six months and a fall of 23 percent over the first half of last year.

The U.S. housing bubble's crash three years ago wiped out trillions of dollars in home equity and the slow pace of foreclosures plus low demand in general caused by the U.S. recession kept the glut of unsold homes from playing out.

The time it takes to complete a foreclosure grew this quarter to an average 318 days, up from a revised 298 days in the first quarter and up from 277 days in the second quarter of last year. Foreclosures took longest in New York -- 966 days.

Editing by Lisa Shumaker

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