What Recovery? Home Prices May Hit Roadblock Soon

By Diana Olick, CNBC Real Estate Reporter

NEW YORK (CNBC) -- The recent growth in U.S. home prices may hit a roadblock in the coming months, thanks to a new supply of distressed properties hitting the market.

Banks are moving more delinquent loans through the pipeline at a faster pace, according to a new report released Thursday by foreclosure sale website RealtyTrac. The number of homes starting the foreclosure process for the first time grew for the second month in a row on an annual basis.

Just over one million properties received some kind of foreclosure filing in the first half of this year, an increase of two percent from the previous six months, according to RealtyTrac.

The numbers are still down 11% from a year ago, largely because banks were still in settlement talks over the so-called, "robo-signing" foreclosure paperwork scandal. After a $25 billion settlement early this year, the banks began moving loans again.

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Foreclosure starts, the first stage of the process, rose 9% in the second quarter of this year from the previous quarter, with the volumes growing in 31 states. For the first time since the housing crash began, California earned the dubious distinction of holding the nation's highest foreclosure rate in June. This new surge may be just the start.

"Lenders and servicers are slowly but surely catching up with the backlog of delinquent loans that under normal circumstances would have started the foreclosure process last year, and that catching up is why the average time to complete the foreclosure process started to level off or decrease in some states in the second quarter," said RealtyTrac CEO Brandon Moore in a release. "The increases in foreclosure starts in the first half of the year will likely translate into more short sales and bank repossessions in the second half of the year and into next year."

That will surely weigh on home prices, which have been recovering of late and causing some to claim that the housing crisis is over.

Even Berkshire Hathaway CEO Warren Buffet, who had said housing was "flat lining," changed his tune in an interview with Becky Quick on CNBC's "Squawk Box" Thursday morning.

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