Foreclosure rate dips in May, but remains high
— -- The pace of foreclosures remains at a historic high and mortgage demand is tumbling as interest rates climb, reflecting a wobbly housing recovery that could falter if rates continue to rise.
While foreclosure filings dipped 6% in May compared with a month earlier, the overall pace of foreclosures was still the third-highest month on record, according to a report today from RealtyTrac. Foreclosure filings were reported on 321,480 homes during May, an increase of 18% from May 2008. One in every 398 homes received a foreclosure filing last month.
That marks the third-consecutive month where the total number of properties with foreclosure filings exceeded 300,000 — a first in the history of the report.
The high number of foreclosure filings comes despite efforts by the Obama administration to get banks to modify the loans of troubled borrowers into more affordable monthly payments.
"I expect (the high rate of foreclosures) to continue through most of the year, given that unemployment will rise and the loan modification program seems to be less effective than expected," says Mark Zandi at Moody's Economy.com.
Nevada, California and Florida posted the top state foreclosure rates.
Mortgage applications also slid last week to the lowest level since February, according to a report Wednesday by the Mortgage Bankers Association (MBA). The index measuring the volume of loan applications fell 7.2% from a week earlier, led by a nearly 12% drop in refinancings. The purchasing index rose 1.1%.
The average interest rate for 30-year fixed mortgages increased to 5.57% from 5.25%, according to the MBA.
Investors fearful of inflation have been demanding higher yields on Treasury notes, which is causing rates to rise despite efforts by the Federal Reserve to keep them at historic lows.
Brian Bethune at IHS Global Insight says the rising rates are worrisome because they could cause a drop in home refinancings and purchases. That, he says, could have an overall effect of dampening the housing recovery.
