Foreclosures RisingSouthern Washington. Western Pennsylvania. Southwest Florida. The entire state of Nevada. All of these locations — and many more, for that matter — are in the news today as evidence that foreclosures are coming back after a multi-year decline. According to Businessweek:

Lenders took back 38,946 homes, up from 34,997 in April, according to Irvine, California-based data firm RealtyTrac, which tracks notices of default, auction and seizures. Thirty-three states had increases in the number of homes repossessed, RealtyTrac said in a report today.

Banks are more willing to move to the final stage of foreclosure because there is sufficient demand and prices are improving, said Eric Workman of Tinley Park, Illinois-based Mack Cos. […] “For a very long period of time, the market in general and specifically banks were unsure of what these assets were valued at,” Workman, vice president of sales and marketing at Mack, said in a telephone interview. “With increasing stability of the economy and housing prices throughout the U.S., these banks and sellers are getting much more comfortable with the value of their properties.”

Of course, a lot of inventory has been held up in the last year’s discussions between lenders and the government. And it’s crucial to remember that the rising values prompting lenders to revisit foreclosures are the same rising values that may return many underwater borrowers to positive equity in their homes. Then there’s this graph (via Paul Kedrosky), which shows foreclosure notices in California dropping to pre-2007 levels.

Taken together, this data reflects a cluster of relatively small developments that we in the REO field should keep in perspective. As HousingWire notes today, the May increases account for a 2% bump in foreclosures and a 4% rise in foreclosure starts since April, which is still down 28% and 33% (respectively) from their levels one year ago. And after a 75-month low in a market starved for inventory, it seems foreclosures had nowhere to go but up. So while the path seems clear for an REO rebound, it’s likely to be a gradual one.

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