Foreclosures in the U.S. are falling, data released today by foreclosure tracking firm RealtyTrac shows. Last year, 1.8 million properties were foreclosed, down 2.7% from 2011, and down 36% from 2010.
While the national rate is falling, many of the states hardest-hit by the housing crisis and recession continue to be weighed down by a higher rate of homes in the foreclosure process. Foreclosure activity actually increased in 25 states. In Florida, foreclosure filings increased by more than 50%. Based on RealtyTrac’s 2012 data, 24/7 Wall St. reviewed the 10 states with the highest rate of homes in foreclosure.
While compared to 2011 the list of 10 states with the highest foreclosure rate is somewhat different, it still represents almost all the states that were hit hardest by the housing crisis/recession. The seven states with the biggest home value declines during the housing crisis are in the top 10 foreclosures, including Michigan, California, Georgia, Illinois, Arizona, Nevada and Florida.
As foreclosures that began in some cases more than a year ago continue to make their way through the process, these states’ housing markets are projected to continue losing value. The states with the top three foreclosure rates also have the top three projected home price declines.
Apart from abysmal home price, residents of these states also felt the pressure of a weak job market. Unemployment rates in eight of the 10 states were at or above the national rate as of November 2012.
While the economic pressures have clearly had a long-term effect on high foreclosure rates, it is the state foreclosure laws that have had the biggest impact on a state’s housing market — which states have continued to see large numbers of homes in foreclosure and property values decline and which have begun to turn around.
The amount of time it takes for a foreclosure to be fully processed once property owners default on their payments and until their homes are repossessed varies widely by state. In many states, the legal processing time for a foreclosure is less than 100 days. In several of the states with the highest foreclosure rates, that processing time is well in excess of that. In Illinois, which is on our list, it takes 300 days for the foreclosure to complete.
The reasons why the foreclosure processing period is longer in these states is because it usually involves the court system. Judicial foreclosures are handled by the court and usually include motions filing and seeking a final judgment from a judge. Nonjudicial foreclosures, which tend to take less time to process, are governed by state law and do not require court intervention. Nine of the 10 states with the highest foreclosure rates use judicial handling at least partially, and four, including the state with the highest foreclosure rate, Florida, only uses Judicial processing.
Daren Blomquist, vice president at RealtyTrac, explained “2012 was the year of the judicial foreclosure, with foreclosure activity increasing from 2011 in 20 of the 26 states that primarily use the judicial process, and a judicial state — Florida — posting the nation’s highest state foreclosure rate for the first time since the housing crisis began.”
24/7 Wall St. reviewed housing data provided by RealtyTrac to rank the states that had the highest percentage of properties that had a foreclosure action taken in 2012. RealtyTrac also provided foreclosure rates from previous years, as well as the foreclosure processing laws of each state. In our analysis, we reviewed home price change and projections as of the second quarter of 2012 as provided by Fiserv. We also reviewed November 2011 and November 2012 unemployment rates from the U.S. Bureau of Labor Statistics.
These are the 10 States with the Most Homes in Foreclosure