Foreclosure activity dropped in February to an 11-year low, according to new data from ATTOM Data Solutions. This decrease marks the lowest point since November 2005, and the 17th consecutive month of annual decreases. But despite this drop, 10 states still saw an increase in foreclosure activity. States that saw the largest increases include New Jersey with an increase of 16%, Delaware with 14%, Louisiana with 12%, Alabama with 10% and Hawaii with 8%. Some cities also saw strong increases, contrary to the national trend. Houston, Texas, for example, increased 97% from an abnormally low February 2016. Other cities such as San Francisco and New York City also increased 25% and 9% respectively.
Once again, some states countered the national trend with annual increases in foreclosure starts. The state that saw the highest increase was Alabama with an increase of 40% in foreclosure starts, followed by Texas at 26%, New Jersey at 24%, Florida at 12%, Illinois at 11% and Arizona at 9%. In some of these states, increasing foreclosure starts is becoming a trend. Foreclosure starts increased three of the last four months in Texas, two of the last three months in New Jersey, six of the last seven months in Illinois and six of the last 12 months in Arizona.
Why are some states seeing increases in foreclosure starts, contrary to the national trend? Attom Senior Vice President Daren Blomquist explains that there is a backlog of lingering legacy distress states like New Jersey and Florida along with D.C. This results in a foreclosure process that became dysfunctional during the housing crisis. “While the share of bubble-era originated loans that are actively in foreclosure is down to 52% nationwide, in DC those bubble-era loans still represent 71% of all foreclosures, while in New Jersey it’s 61% and in Florida it’s 56%,” he said.
But not every state is still working through crisis-era loans. For those that aren’t, there is another phenomena causing an increase in their foreclosure starts. Blomquist explains that states that were quick to put the housing crisis and bad loans originated during the crisis, saw foreclosure rates bottom out last year. However, due to the relaxed lending standards, the foreclosure starts are gradually beginning to rise. “This is why we’re seeing consistent increases in foreclosure starts in states like Arizona, where only 39% of foreclosures are tied to bubble-era loans, and in Texas, where only 33% of foreclosures are tied to bubble-era loans,” he stated. “The good news in these states is that even with the rise in foreclosure starts, foreclosure activity still remains below pre-recession levels,” Blomquist added.