Home Seizures Rebound 12% in January

Foreclosures are speeding up again. For three straight months through December, foreclosure activity had declined as banks worked to refine their procedures and documentation. In January, however, foreclosure activity increased by 1.4%, according to foreclosure tracker RealtyTrac. The delays might not be completely over yet, but they may be starting to abate.

Bank repossessions drove the increase in activity, up by 11.9%. At 78,133, they were the highest since October. Yet default notices and auctions both continued to decline in January, down 0.7% and 3.7%, respectively. So the increase in seizures was large enough to overshadow the declines in the other two stages of foreclosures.

This can be seen pretty clearly through the following chart, which tracks some history of the RealtyTrac data:

foreclosure lines 2011-01.png

You can see that, although there was a big spike in bank repos in January, they still remain far below their September peak. For default notices and auctions, however, it looks like their declines are about set to reverse course, as their curves are flattening.

The stacked bar chart provides another way to look at the numbers:

foreclosure stacked bar 2011-01.png

Through this, you can see the increase in total foreclosure activity. As the chart shows, it's nearly back up to its November level, but still much lower than it was during the months leading into October. As banks continue to work through the foreclosure inventory they delayed over the past several months, we should start to see these numbers begin to rise faster.

It's a little difficult to make much sense of the recent data on a state-by-state basis, because different states may have different legal hoops that banks are attempting to jump through when processing foreclosures. So the best and worst states in January might not be truly indicative of the status of the housing market in those locations. But here's the list of the 10 states with the most foreclosure activity:

top 10 foreclosures 2011-01.png

The top three aren't terribly surprising. But Idaho took a leap from sixth-worst in December to fourth in January. The state's foreclosure activity was up 29.4% last month. This contrasts with Florida, which saw its ranking fall again in January to ninth from seventh in December. The state was fifth-worst in November. So it is likely one of the states where foreclosure delays are significant.

In a sense, January's increase in foreclosure activity is good news. The steep decline we saw after October was not a sign of homeowners doing a better job paying their mortgages. Instead, it was indicative of banks delaying mostly inevitable foreclosures to make sure all legal aspects of the process were in good order before proceeding. So as foreclosures rise back to levels more representative of what's really going on in the market, the housing sector can continue searching for a bottom and get there sooner, rather than later. Once the market finally stabilizes, it can finally begin to heal.