73,000 homes lost to foreclosure in May

Filings for the month jumped by 48%. Nevada, California, and Florida continue to bear the brunt of the crisis.

By Les Christie, CNNMoney.com staff writer
Last Updated: June 13, 2008: 8:20 AM EDT
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NEW YORK (CNNMoney.com) -- The housing crisis grew worse in May, as more than 73,000 American families lost their homes to bank repossessions, up a staggering 158% from the 28,548 households that were dispossessed in May 2007.
Foreclosure filings of all kinds, including default notices, notices of sheriff's sales and bank repossessions, were up 48% from May 2007, according to the latest release from RealtyTrac, the online marketer of foreclosed properties. Filings increased 7% from April.
"May was the 29th straight month we've seen a year-over-year increase," RealtyTrac's CEO James Saccacio said in a statement.
The report follows months of increasingly gloomy housing market conditions with home prices, existing home sales and new housing starts all plummeting. The S&P Case/Shiller Home Price Index posted a record 14.1% decline in national home prices for the 12 months ending March 31, while April's existing-home sales were down 17.5% year over year.
Worst-hit cities
Nevada remained the most troubled default state for the 17th consecutive month. One out of every 118 households there received some kind of foreclosure filing during May, up 24% from the previous month and 72% from a year ago.
California led the nation in the sheer volume of filings, with nearly 72,000 properties in some stage of default, which works out to one out of every 183 households. More than 20,000 Californians lost their homes, more than any other state.
Florida recorded over 37,000 filings and 4,300 bank repossessions. Nine of the top 10 cities with the most foreclosure filings were in either Florida or California.
Stockton, Calif., was the worst-hit city last month, with one filing for every 75 households. Cape Coral, Fla., where one out of every 79 homes received a filing, was second. Other hard-hit places were Merced, Calif., which ranked third, Modesto, Calif., which was fourth and Riverside, Calif., which was fifth.
Las Vegas was the only city outside of California and Florida to crack the top 10. In May it had one filing for every 96 households - about five times the national average - which put it in sixth place.
Default rates will rise for many more months, according to RealtyTrac vice president Rick Sharga, who thinks that there could be another 18 months of this activity left. Several factors will continue to boost filings.
"We haven't even seen the full effects of the Alt-As (mostly loans issued without verification of income and assets) yet," said Sharga. Many of these mortgages are option ARMs, negative amortization loans that let borrowers make very small, minimum payments that don't even cover the interest they owe each month. But soon, these payments will spike.
Also driving foreclosures is the fact that more people are walking away from homes they bought at the top of the market that have since lost a lot of value, according to Keith Gumbinger of HSH Associates, a publisher of mortgage industry data.
"These people are looking at the present value of their homes and at their debts and saying, 'What's the point of paying the mortgage?'" said Gumbinger. "We may have not finished wringing these people out of the market yet."
Sharga says that price declines are probably the market's biggest problem right now. "If prices stabilize, foreclosures will too," he said.
As more people than ever are losing their homes, some state and local governments are trying to slow the foreclosure tsunami. Colorado has extended the initial default period to as much as 125 days, and Maryland has increased it to 150 days.
In Philadelphia, homeowner's can't be foreclosed on without having the opportunity to go through a court-sponsored reconciliation session.
Additionally, the administration's foreclosure prevention initiative Hope Now says it has helped over one million at-risk borrowers avoid foreclosure.
These measures help, according to Sharga, but to really break the spiral, more intervention on the federal level may be needed.
"The quickest solution is to get buyers buying again," he said. "The government may have to take some strong action to make that happen."
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