Declining foreclosure inventory has been one of the driving forces behind the rise in U.S. home prices which began in 2012.
But foreclosure starts — the pace at which mortgages enter the foreclosure process — were up 4% month over month in May, according to RealtyTrac's latest foreclosure report (but down 33% from a year ago).
States like Nevada and Florida which were some of the hardest hit during the housing bust are showing some worrisome signs again.
Foreclosure starts were up 81% year over year in Nevada to a 20-year high, and up 19% on the month. Foreclosure activity was up 18% month over month and 1% from a year ago.
When measured by foreclosure rate, Nevada fell to second place, with 1 in every 305 homes having received a foreclosure filing in May. In counties like Lyon, Nevada, 1 in every 209 homes received a foreclosure filing. This compares with 1 in every 885 at the national level.
In Florida, where 1 in every 302 homes received a foreclosure filing, activity was up 20% from last month and 12% from a year ago. Meanwhile, foreclosure starts were up 39% on the month, but down 17% from a year ago.
“Foreclosure activity continued to bounce back in some markets where it may have appeared the foreclosure problem had been knocked out by an aggressive combination of foreclosure prevention efforts over the past two years,” said Daren Blomquist, vice president at RealtyTrac in a press release. “Places like Nevada, where foreclosure starts increased to a 20-month high, and Maryland, where overall foreclosure activity increased to a 33-month high."
And there are other reasons to be concerned.
Let's first look at Nevada. Home prices in the silver state were down 46.6% from 2007 to Q4 2012, according to latest CoreLogic Case-Shiller data. But prices on single-family homes, including distressed sales, were up 24.6% year-over-year in April.
The employment situation isn't promising either. A report from Reno Gazette Journal shows that when we take into account underemployment and those that have been discouraged from looking for jobs, the unemployment picture is quite a bit worse than the headline number suggests:
"Shadow unemployment numbers are especially staggering in Nevada, which consistently posted the highest jobless rate in the nation since the recession.
"In the first quarter, Nevada’s annual unemployment rate was 10.8 percent, which equates to more than 140,000 people. Labor statistics, however, peg shadow unemployment at 19.6 percent — more than a quarter-million Nevadans."
Housing expert Robert Shiller has warned that markets like Las Vegas are already looking frothy.
What's more, at 45.4%, Nevada continues to have the nation's highest negative equity share — where homeowners owe more on their mortgages than their homes are worth.
In Florida, home prices were down 35.2% from 2007 to Q4 2012. Prices on single-family homes, including distressed sales, were 10.5% YoY in Florida.
Florida's unemployment picture is better that Nevada's. The unemployment rate stood at 7.5% in March 2013, the end of Q1 and has been decreasing, according to the Bureau of Labor Statistics.
Improving jobs market and consumer confidence, along with declining distressed homes has been crucial to the housing recovery. The latest data suggests that while the housing recovery is coming along, many local markets continue to struggle.
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