Foreclosure numbers fall in July as starts decrease

Foreclosure starts dropped for the first time in three months, although repossessions ticked up, as rising property values may be easing some difficulties facing struggling homeowners, according to a report from Attom.

The number of overall foreclosure filings, consisting of default notices, scheduled auctions or bank repossessions, dropped to 31,877 in July, 9% below the previous month's total, the real estate data and business intelligence provider said. The figure amounted to a rate of one in every 4,380 property units in the country with a filing, compared to one in every 3,972 in June.

July's numbers, though, were 5% higher on a year-over-year basis, but still reflect favorable trends for homeowners, according to Attom CEO Rob Barber. 

"The slight decline in foreclosure filings we are seeing is yet another sign of a rebounding housing market. With home prices back up, several factors have combined to put more financial resources in the hands of homeowners, providing more options to avoid foreclosure," he said in a press release. 

Recent data from CoreLogic show home values appreciating by almost 5% in the first half of the year, which may be providing an outlet for struggling borrowers, helping them avoid serious distress. At the same time, efforts to find new loss-mitigation strategies continue after success with some programs introduced during the COVID-19 pandemic.

But even though overall filings headed downward, completed foreclosures resulting in bank repossessions grew to 3,332, up 4% from 3,215 in June and 9% annually, moving closer to pre-pandemic levels. But the increase comes after the repo total fell by 20% in June. Illinois, Pennsylvania and California led the country in July with 355, 230 and 217 repossessions, respectively.

New foreclosure starts, which fell 12% on a monthly basis and 2% from one year earlier to 21,020 units, offset the rise in repossessions. Among metropolitan areas with more than 1 million residents, Salt Lake City saw the greatest improvement, with 63% fewer starts from June. Honolulu's total shrank by 53%, followed by Kansas City, Missouri, with a 46% decline. Hawaii led all states with 51% fewer new foreclosure notices.  

States on the Eastern seaboard led the nation with the highest rates of overall foreclosure notices, inclusive of all filings. Maryland, where one in every 2,071 housing units had a notice, landed at the top of the list. New Jersey and Delaware followed with rates of one in 2,335 and one in 2,343.

While July's data suggest homeowners are increasingly finding means to stay current on their mortgages, volatility in both the housing market and overall economy still poses a threat for disruption. While unemployment remains near historic lows and the pace of inflation has slowed, mortgage rates hovered near 7% in early August.

"Given the U.S. housing market remains in flux, the various forces at play could keep the market improving or turn it back downward over the coming months," Barber said.