In the wake of the housing market collapse, a wave of foreclosures tore through the country, crippling numerous local economies. But this trend may have finally started to subside this year.
The total dollar amount of overall mortgage delinquency fell 37 percent in May from the post-recession peak, according the May National Consumer Credit Trends Report from Equifax. While the rate is still well above historical levels, this improvement is a promising sign that more homeowners are able to make their loan payments.
"That severe mortgage delinquencies are trending downward is not surprising given generally improving economic conditions," said Equifax chief economist Amy Crews Cutts. "What is surprising is that even with the foreclosure moratoriums and the slow resolution of foreclosure backlogs, the downward trend has been a steady, consistent drumbeat of recovery."
Borrowers who were severely delinquent - meaning they are 90 or more days late on payments - experienced the most significant improvement. Mortgage records show this share was down 45 percent in May, totaling $320 billion, from its peak in January 2010 when $580 billion worth of these loans were 90 or more days delinquent.
Should this trend continue, the overall delinquency rate could return to mid-2007 levels - when they were lowest - by 2014, experts from Equifax say.
This decline in the number of households late of loan payments resulted in fewer foreclosures in May as well. Total home repossessions were down 4 percent from a year early, marking 20 straight months of declines, according to a report from RealtyTrac. This resulted in an estimated 205,000 filings.
After the multibillion-dollar settlement reached between the nation's largest mortgage lenders and state attorneys general on behalf of homeowners wrongfully foreclosed upon in recent years, some experts anticipated the home repossession rate to surge. However, this expectation has not yet occurred.
More buyers purchasing foreclosures
Despite the slowdown in foreclosures, the distressed properties inventory is still very deep and could take years to clear out. While this adds a significant amount of downward pressure to overall prices, a growing number of prospective buyers are capitalizing on the bargain prices of foreclosed houses and short sales to make the transition to homeownership.
During the first quarter alone, foreclosure accounted for an estimated 26 percent of all transactions, according to a separate report from RealtyTrac. These properties had an average selling price of $161,214, which is a 27 percent discount from the average price of a non-distressed home.