Banks repossessing more homes as home prices rise

Julie Schmit | USA TODAY

Banks repossessed 11% more homes in May than in April, potentially a sign that they, too, want to unload homes in a strong market.

Bank repossessions increased in 33 states, with some seeing a big jump, market researcher RealtyTrac reports.

In North Carolina, repossessions were up 60% in May from April. Oregon saw a 57% jump, and Wisconsin and Illinois, a 44% increase, RealtyTrac says.

"Given the shortage of inventory and rising home prices, banks have little motivation to hold back on any foreclosures," says Craig King, chief operating officer of Chase International brokerage, which covers the Reno market.

Overall, foreclosure filings — which include default notices, scheduled auctions and bank repossessions — were up 2% in May from the 75-month low in April, RealtyTrac says. Filings were down 28% from a year ago.

Repossessions, which numbered almost 39,000 in May, are the end of a foreclosure, but foreclosure starts mark the beginning of a process that can take years.

In May, foreclosure starts nationwide were up 4% from April but down 33% from a year earlier.

However, 14 states saw foreclosure starts increase from last year. In some of those states, courts or legislatures slowed the foreclosure process to make sure they were done correctly following revelations in 2010 that many weren't. As a result, those states tend to have more distressed homes still in the market.

In New Jersey, foreclosure starts in May were up 82% from a year ago. Nevada starts were up 81% year-over-year. New York starts jumped 13% year-over-year, RealtyTrac says.

Despite the jump in activity in some markets, the housing recovery has strengthened most local markets enough to "quickly shake off a few more blows from these nagging foreclosures," says Daren Blomquist, RealtyTrac vice president.

Nationwide, home prices were up 12.1% in April year-over-year, CoreLogic says.

Tight inventories of homes for sale in many markets are helping to drive the rapid increases, economists and real estate experts say.

However, there are signals that the inventory crunch has bottomed.

Nationwide, the number of for-sale listings on Zillow was down 12% as of June 2 from a year ago. But that's less severe than the almost 18% shortfall recorded in January, Zillow says.

Inventory will likely remain below year-ago levels for a while as builders ramp up capacity and sellers wait for even higher prices, says Stan Humphries, Zillow economist.

"But a corner has been turned," he says.