Foreclosure starts rose for the first time in eight months in May, but there is still reason to be optimistic about the United States housing market, according to the latest Mortgage Monitor Report of the latest available data released by Black Knight Financial Services. The report indicated that foreclosure starts nationwide rose by 9.5 percent.
The rise in May reverses the eight month trend of continuing decline in starts. However, the outlook for the housing market is still trending upward compared to years past and Black Knight cautioned against reading too much into the backwards step.
"While foreclosure starts did rise over 9 percent in May, it's important to remember the historical trend is still one of improvement," said Kostya Gradushy, Black Knight's manager of Loan Data and Customer Analytics. "On a year-over-year basis, January through May foreclosure starts were still down 32 percent, and we are still looking at the lowest level of foreclosure starts in seven years."
"Additionally, over half of these starts are repeat foreclosures, rather than new entries into the pipeline, That is, these are loans that had been in foreclosure, shifted back to either current or delinquent status by way of modification, repayment plan or some action by the borrower, but have now fallen into foreclosure once again."
New Jersey was the only state in the union to see a year over-year increase in foreclosure starts and almost 80 percent of starts nationwide came from loans originating in 2008 or earlier.
Although foreclosure starts were up in May there were positive notes to take from the report. The total U.S. foreclosure pre-sale inventory rate actually dropped 5.62 percent in the month. Foreclosure inventory is down 37.23 percent year-over-year, signaling that Americans are more likely to be able to pay their mortgages now than they have been at any point since the financial crisis began.
Likewise, the overall loan delinquency rate (the number of loans 30 or more days past due, but not in foreclosure) is down 7.55 percent from this point last year and stayed static in May at 5.62 percent.
This bump in the road notwithstanding, a look at the recent trend in mortgage performance and other indicators reveal that there is still good reason to be cautiously optimistic that housing will continue on its long, gradual path to recovery.