NEW YORK (
) -- Foreclosures hit yet another record in September, but those numbers are expected to skew downward in coming months because of temporary "freezes" implemented at big banks.
In September, 347,420 U.S. properties received a foreclosure notice, up 3% on a sequential basis and 1% year-over-year. Banks repossessed 102,134 homes, the first time that metric breached the 100,000 mark in a single month. Foreclosures also reached a quarterly record with 930,437 properties receiving a notice in the three months ended Sept. 30.
RealtyTrac CEO James Saccacio said lenders were "taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months." But because of foreclosure delays confirmed by
Bank of America
, GMAC and other major lenders reviewing their paperwork and processes, progress is expected to slow dramatically.
Rick Sharga, senior vice president of RealtyTrac, is predicting that "October numbers will almost certainly be distorted," with "marginal slowing" throughout the rest of the quarter. Then, the springtime could see accelerated foreclosure action -- in terms of repossessions and sales -- speeding up the typical seasonal pattern.
However, "if we have anything resembling a full-on moratorium," says Sharga, "we can expect to see some real, real problems in the housing market that might spread out into the economy."
Part of the problem is that foreclosure sales now comprise a huge chunk of housing transactions. In September, more than 30% of home sales were comprised of distressed real estate, with 18% coming from bank auctions. Sharga and other industry experts say the foreclosure delays have put a chill on the home-buying market as well. The moratoria put in place by big lenders stem from paperwork errors that led to questions about the true ownership of foreclosed-upon homes.
Sharga advises home buyers to steer clear of all-cash purchases without title insurance, the most vulnerable type of transaction for court battles over ownership. But he says it's "probably very safe" to buy bank-owned property on the market in a more traditional setting, and "100% safe" to take part in short-sale transactions.
"Any time you throw uncertainty into the mix, it's going to make buyers more cautious about what they do," says Sharga. "One area we're encouraging people to be a little wary about is the typical foreclosure auction. At least until the dust settles and we know things are being done the way they're supposed to."
-- Written by Lauren Tara LaCapra in New York
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