New property starts up in the United States but foreclosures holding back recovery

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Biggest increase in apartment starts

The construction of new houses and apartments in the United States increased by 15% in September from the previous month to the highest rate since April 2010, new figures show.

The data from the Census Bureau and the Department of Housing and Urban Development show that apartment starts saw the biggest increase.

Permits for apartments with five or more units rocketed up by 53.4% over August and by 57.6% year on year. The data shows 227,000 apartments with five or more units were started in September, up from 144,000 in 2010.

Single family starts were up 1.7% over August and down 4.9% over September 2010. September building permits fell 5% to a seasonally adjusted annual rate of 594,000 from 625,000 in August, but rose 5.7% from 562,000 a year earlier.

While single family housing starts in September reached a rate of 425,000 units, up 1.7% from August when the rate hit 418,000 units. Home completions last month grew 2.1% year on year.

But data from CoreLogic shows that properties in foreclosure are taking a long time to sell. More than 23,200 foreclosures in 2006 sat unsold until the second quarter of 2010, more than four years later, according to a study from the data analytics firm.

Analysts studied the destinations of more 355,000 properties that hit foreclosure auctions in 2006. Investors bought about a third of them at the courthouse steps, and the remaining 233,000 went back onto lenders’ books as real estate owned.

Of those, 90%, or 210,000 homes, sold as REO to third party buyers. Of these, half took six months to sell and 21% took more than one year to unload.

But 23,200 sat unsold for four years, CoreLogic found. These are properties that entered the foreclosure process before the system surpassed its maximum capacity in many states. REO sales have yet to peak, meaning the time banks and the US government will have to hold these homes could go even longer.

‘It is well known that foreclosure and liquidation timelines have risen dramatically over the last few years. What is less known is how REO persistence, or REOs remaining unsold for extended periods of time, has changed over time,’ CoreLogic said.

What is known is that the longer the property sits, the more cash buyers end up with the property, often for steep discounts. For the 2006 REO that resold more the one year later, 55% went to cash investors, compared to 40% for the entire foreclosure stock that year.

More than 11,000 of the REO sales were resold three times over the next five years, and 70% were resold through cash transactions.

For the 2006 REO sold to buyers who took out a mortgage, only 2% fell back into REO in the five years since.

‘This indicates that REO recidivism is not as significant a concern as previously thought,’ CoreLogic said.

Such stagnant pools of inventory are crippling a recovery in home prices, according to most analysts who are predicting even more depreciation in 2012.

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