Foreclosure Starts Spike for 2nd Straight Month in June

US housing market tracker RealtyTrac reported this week that foreclosure starts increased for a second straight month in June, showing that banks are picking up the pace of foreclosures after slowing seizures for the last couple of years. The development comes even as the housing sector is showing stronger signs of recovery than at any point since the recession. Builder confidence has surged in recent months, leading to a boost in construction spending, sales have picked up, and prices have reached a bottom and begun to climb in many markets around the country. These developments have prompted many economists to declare the housing woes over, but a surge in foreclosures threatens to hinder the recovery.

Over the last two years, banks have all but stopped foreclosing on delinquent homeowners as they worked with regulators on a settlement over allegations of improper foreclosure activity. A $25 settlement was reached in April involving the nation’s five largest lenders, paving the way for the banks to start moving on foreclosures again. As a result, foreclosures rose on a year-to-year basis in the quarter through June, the first annual increase in starts since the final quarter of 2009.

According to RealtyTrac’s report, total foreclosure activity fell nearly 4 percent from May last month and were down over 11 percent from a year earlier, affecting a total of 197,834 homes. That figure includes notices of default, scheduled auctions and bank repossessions. Of course, despite the decline on overall activity, foreclosure starts rose 4 percent on a year-to-year basis in June, though they were down from May, when the settlement sparked a massive increase. The increase in starts has some concerned that prices may begin falling again, as a surge in steeply discounted foreclosures threatens to hit the market.