More than 1 million U.S. households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.
Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released today by RealtyTrac Inc., a foreclosure listing service.
"That would be unprecedented," said Rick Sharga, a senior vice president at RealtyTrac.
By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.
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That could be trouble for the Northern San Joaquin Valley's struggling economy. The region has been among the worst in the nation for foreclosures since the housing market collapsed about 4½ years ago.
The steep decline in home prices, widespread use of subprime loans and the deep national recession triggered a flood of foreclosures. As the real estate market slowed, job losses in related businesses spread to other sectors of the economy — eventually pushing unemployment to almost 20 percent.
In recent months, however, housing prices in the valley have leveled off and even posted an increase. Stanislaus County median home sales prices jumped $13,000 in May, rising to $148,000.
That's the first significant increase since 2005, when the housing market collapse began. For most of the past 18 months, Stanislaus' median price has bounced between $133,000 and $140,000.
Unemployment numbers have improved, albeit at a time when hiring traditionally rebounds because of the annual summer harvesting of valley crops.
Still, foreclosures persist. The three-county region continues to have the highest percentage of defaulted mortgages in California.
Since 2007, nearly 52,500 Stanislaus, Merced and San Joaquin county homes have been lost to foreclosure. That includes 12.7 percent of all houses and condos in Stanislaus, 15.5 percent in Merced and 13.9 percent in San Joaquin.
Nationwide, this latest surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.
The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear the backlog of distressed inventory on their books.
The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to Realty-Trac, which tracks notices for defaults, scheduled home auctions and home repossessions.
In all, about 1.7 million homeowners received a foreclosure-related warning from January through June. That translates to one in 78 U.S. homes.
In the valley, however, the worst of the foreclosure mess may be over, but the region remains marred by widespread mortgage default. There were significantly fewer foreclosure filings this January, February and March compared with the same months last year.
Notices of default — the first step of the foreclosure process — dropped 41.6 percent in Stanislaus County, 46 percent in Merced County and 43.4 percent in San Joaquin County.
The number of homes lost to foreclosure plunged 9.7 percent in Stanislaus, 33 percent in Merced and 7.3 percent in San Joaquin, according to statistics released Monday by MDA DataQuick.
Although foreclosure notices posted monthly declined in April, May and June, Sharga said people shouldn't read too much into that.
"The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market," he said.
On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.
Assuming the U.S. economy doesn't worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties on their books now.
And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn't improve fast enough to lift home sales.
The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say. Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.
Two of every three Stanislaus County homes sold this year have been bank owned or "short sales" to avoid foreclosure, according to Realty-Trac's analysis of homes sold during January, February and March.
Merced, San Joaquin, Stanislaus and Imperial counties had the highest percentage of bank-owned and pre-foreclosure sales in California. And California had the second-highest percentage of such foreclosure sales in the nation, surpassed only by Nevada.
"The downward pressure from foreclosures will persist and prices will be very weak well into 2012," said Celia Chen, senior director of Moody's Economy.com.
She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.
Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.
There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.
Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.
Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.
Bee City Editor David W. Hill can be reached at firstname.lastname@example.org or 578-2336.