Foreclosure.com has announced that total foreclosures for 2005 increased by 12.7 percent, and new foreclosure filings in December increased by 7.7 percent, creating the sharpest rise in inventory since March 2005. Competitor Realtytrac says that their December national foreclosure rate showed one new foreclosure for every 1,422 U.S. households, the highest foreclosure rate reported in 2005.
The South region of the U.S. -- Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee and Texas -- led the country with a 17.4 increase in new foreclosures from November to December and a nine percent increase in new foreclosures. The Midwest region showed the second highest percentage increases, followed by the Northeast and West regions.
"The relative stability of U.S. foreclosure inventory ended in December," said Brad Geisen, president and CEO, Foreclosure.com. "With lending institutions closing their books at the end of the year, it is somewhat common for the foreclosure inventory to rise. It is premature to predict that December's inventory indicates a foreclosure crisis in the U.S.; however, this rise in inventory, which is higher than in recent years, should be closely monitored as 2006 begins."
Geisen continued, "If factors such as waning investor confidence in the housing market, high interest rates and a weakening sellers market continue, it is very likely that foreclosure inventory will remain high in the early months of 2006. Regardless of what happens in the first quarter, the current foreclosure inventory represents a very strong buyers market for investors and individuals."
In similar news, RealtyTrac showed that 81,290 properties nationwide entered some stage of foreclosure in December, a 13.5 percent increase from November. The report shows a December national foreclosure rate of one new foreclosure for every 1,422 U.S. households, the highest foreclosure rate reported in 2005.
"December's higher US foreclosure rates were almost exactly the same foreclosure rates reported in October, which means that the two months with the highest numbers of foreclosures were both in the fourth quarter of 2005," said James J. Saccacio, chief executive officer of RealtyTrac. "These rising numbers to finish off the year may indicate that economic factors such as higher interest rates are making it harder for some homeowners to stay current on their mortgage payments."
Texas documented the highest foreclosure rate of any state thanks to a 61 percent increase in new foreclosures in December. The state reported 12,753 properties entering some stage of foreclosure, one new foreclosure for every 631 households and the most new foreclosures reported by any state. Texas accounted for more than 15 percent of the nation's new foreclosures.
Increasing foreclosures in Ohio and Indiana kept foreclosure rates in those states among the nation's five highest for the second month in a row. Ohio reported 6,767 properties entering some stage of foreclosure, a 36 percent increase and one new foreclosure for every 707 households. Indiana reported 3,387 properties entering some stage of foreclosure, a 21 percent increase and one new foreclosure for every 746 households.
Foreclosures jumped 30 percent in Nevada and 22 percent in Utah, and foreclosure rates in those states also ranked among five highest nationwide. Nevada reported 1,124 properties entering some stage of foreclosure, one foreclosure for every 772 households, and Utah reported 871 properties entering some stage of foreclosure, one foreclosure for every 882 households.
Foreclosure rates in Colorado, Georgia and Florida dropped out of the five highest nationwide thanks to decreasing foreclosures in December. Colorado reported 1,264 properties entering some stage of foreclosure -- a 53 percent decrease -- and the state's foreclosure rate registered below the national average for the first time in 2005. Georgia reported 3,007 properties entering some stage of foreclosure, a 32 percent decrease and one new foreclosure for every 1,030 households. Florida reported 8,050 properties entering some stage of foreclosure, a 9 percent decrease and one new foreclosure for every 908 households.
California reported 7,674 properties entering some stage of foreclosure, a 27 percent increase and the third most new foreclosures reported by any state in December. But with new one foreclosure for every 1,592 households, the state's foreclosure rate remained below the national average. New York also maintained a foreclosure rate below the national average with 4,500 new foreclosures, a 4 percent decrease from the previous month.
This may be the storm before the calm.
Rising foreclosures are harbingers of retreating markets. Fannie Mae predicts home sales will drop 5 percent to 10 percent. The NAR predicts that 2005 housing will soften, and agrees with the National Association of Home Builders that the days of double-digit home appreciation might be over, at least for the short term, and that homebuyers will have to accept gains of about 6.5 percent.
Yet, jobs -- the anchor of homebuying -- are on the increase. Just under 200,000 jobs were created every month in 2005, excluding the erasure of jobs caused by Hurricanes Katrina and Rita in September and October.
What's not clear is if the rising number of foreclosures was due to the hurricanes -- Georgia had a huge number of foreclosures, yet Louisiana and Florida had relatively few by comparison. Soft-hit Texas also had a high number.
Could rising foreclosures be offset by reigning in exotic loans (interest-only, option-only, etc.)?
"Although it is difficult to gauge the exact size of the market, high loan- to-value lending programs and reduced credit standards have virtually guaranteed a large number of properties reverting from private to institutional ownership, even in a period of extremely low interest rates and a generally positive real estate economy," says Tom DiMercurio, founder of the Mercury Alliance and president of BuyBankHomes.com.
Fannie Mae and Freddie Mac are tightening their standards on exotic loans and plan to guarantee buy-back from lenders on fewer exotic loans in 2006. Could that end the sudden escalation in foreclosures?
In related news, personal bankruptcy filings were also up in '05, setting a record for most filings in reent history, more than 2 million. Presumably, the sudden uptick is due to a new law that is being enacted that made sweeping changes to bankruptcies, making it much more difficult to declare and to walk away from personal debts. 
