States with faster foreclosure rates seeing sharper home price increases

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Many states with faster foreclosure processes are seeing sharper increases in home prices than states where foreclosures take longer to get done.

There are exceptions, and other factors — such as job growth — are likely stronger drivers of home price trends, economists say.

But home price data generally show stronger price increases in states where courts don't have to approve foreclosures than in states where they do. Foreclosures are completed faster where court approval isn't necessary.

Last year, home values tracked by Zillow, a web-based real estate tracker, rose an average 5.4% in the 24 states where foreclosures don't go through the courts, according to Zillow. Where they do, the average increase was 3.2%.

Asking prices, a leading indicator of price trends, show a similar pattern.

In January, asking prices in non-judicial states were up an average of 7.3% year-over-year vs. 3.1% for judicial foreclosure states, show data from real estate website Trulia.

Non-judicial foreclosure states have tended to clear out distressed home inventory quicker, which is helping prices, says John Burns, CEO of John Burns Real Estate Consulting. Its home price analysis shows that the 10 major metropolitan areas that have seen the most rapid appreciation in the past year are in non-judicial foreclosure states.

Job growth and how far prices dropped during the housing bust are probably stronger drivers of home price trends, says Trulia economist Jed Kolko. But foreclosure speeds are a contributing factor, he and others say.

In Florida, New York and New Jersey — all judicial foreclosure states — the average loan in foreclosure was past due for more than 31 months before the process was completed, according to December data from Lender Processing Services.

In California, Arizona and Nevada — all non-judicial foreclosure states — that average was fewer than 22 months, LPS data show.

Those three states were among the top seven in terms of home value gains last year, Zillow's data show.

Homes lingering in foreclosure "creates real uncertainty," which hurts prices, and inhibits investor buyers, says Stan Humphries, Zillow's chief economist.

Investors have played a big role in driving prices higher in Arizona, Nevada and California, he adds.

As of December, 10% of Florida's home loans were still in some stage of foreclosure, the highest percentage in the nation. Behind it were New Jersey, at 7%, and New York, at 5%, according to CoreLogic.

The overhang of distressed homes in the market "is absolutely contributing" to smaller price gains in judicial foreclosure states, says Mike Fratantoni, economist with the Mortgage Bankers Association.

Florida home values, up 6.4% last year, bested the national rise of 5.9%, Zillow's data show. But values rose less than 1% last year in New York and New Jersey, Zillow says.

Florida values would probably have risen more last year if more of its foreclosures were behind it, says Kolko.

That's because Florida, like Arizona, California and Nevada, saw home prices fall more than 40% from its peak before the housing bust. It's also a market that attracts investor and second-home buyers.

Exceptions to the trends in price gains between judicial and non-judicial foreclosure states underscore that many factors influence home values, Kolko says.

For instance, Zillow's data show strong price gains last year in Indiana, a judicial state. On the other hand, Rhode Island had the greatest price depreciation last year, the data show, and it's a non-judicial state.

Burns' data show that five of the top 20 housing markets for price gains were cities with full or partial court oversight of foreclosures, including Washington, D.C., New York and Miami.

Mortgage Rates Holding Steady

Story first appeared on USA Today -

The average U.S. rate on the 30-year fixed mortgage was unchanged this week near historic lows, while the average rate on the 15-year loan fell. Low mortgage rates could help strengthen the housing recovery.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan stayed at 3.53%. That's still near the 3.31% rate reached in November, the lowest in records dating to 1971.

The rate on the 15-year fixed mortgage dropped to 2.77% from 2.81% last week. The record low is 2.63%.

Cheap mortgages are encouraging more people to buy homes and refinance, trends that could help boost the economy this year.

Increased sales are helping push home prices up steadily, which makes consumers feel wealthier and more likely to spend. In addition, a limited supply of houses for sale has created demand for new construction, which has made builders more confident.

And when people refinance, that typically leads to lower monthly mortgage payments and even more spending. Consumer spending drives nearly 70% of economic activity.

Still, the housing market has a long way to a full recovery. And many people are unable to take advantage of the low rates, either because they can't qualify for stricter lending rules or they lack the money to meet larger down payment requirements.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.

The average fee for 30-year loans ticked up to 0.8 point from 0.7 point last week. The fee for 15-year loans was unchanged at 0.7 point.

The average rate on a one-year adjustable-rate mortgage fell to 2.53% from 2.59%. The fee for one-year adjustable-rate loans declined to 0.4 from 0.5 point.

The average rate on a five-year adjustable-rate mortgage fell to 2.63% from 2.7% last week. The fee remained at 0.6 point.