NEW YORK – In what could be a crack in the housing market's sturdy foundation, the number of foreclosed homes put up for sale rose 50 percent between February and March, according to a new study by Foreclosure.com (search).
The increase is one of the biggest monthly spikes Foreclosure.com has seen since it began tracking the market in 1999, according to Jim Houston, vice president of the foreclosure listing service.
The survey, released Wednesday, showed 28,190 foreclosed homes (search) were put up for sale across the country in March, which is 50 percent more than in February.
The total number of foreclosed properties available for sale stood at 80,757 at the end of March, up 10 percent from the previous month.
Foreclosure.com tracks government and financial institutions when gathering data on foreclosed properties.
The number of foreclosed properties rose in 47 states in March. Houston attributes this increase to a rise in interest rates during the latter half of 2004 and a slowdown in home price increases.
Houston said it's "possible" this is a sign that the market is turning. However, it's too early to call definitively at this point, he cautioned.
Sometimes, foreclosures are delayed during the holiday season, which may have pushed some February foreclosures into March, he said.
"There are a lot of late filings and some of them take up to 90 days," he said.
If the spike in foreclosures continues in April, he said, it could signal a trend that the housing market is turning down.
The surge in the number of homebuyers opting for adjustable-rate mortgages (search) over the past few quarters could pose a problem for homeowners as interest rates tick up. "We're starting to see repercussions because of that," Houston said.
Indeed, the markets seeing the largest number of foreclosed properties are those whose home values have stopped rising, such as Ohio, Texas, South Carolina and Michigan.
However, certain other markets, such as California, Washington, D.C., and South Dakota, saw larger percentage increases in foreclosures between February and March, which could indicate a turn in those markets. Although the total number of foreclosures remains low in those markets, the percentage increase rose more than 45 percent.
Fitch Ratings analyst Bob Curran expressed surprise at the increase reported by the study. However, he noted that foreclosed properties still represent a very small percentage of the overall housing inventory, which totaled 2.8 million homes in February. He doesn't see the foreclosure numbers as reason for alarm.
"It may simply reflect our overleveraged society and the fact that people are carrying more debt on everything and it doesn't take a lot to affect a small percentage of them in terms of moving them from homeownership to not," Curran said.
"It's hard to make a case, based on what I see here, that all of a sudden it's become an enormous trend." He said the economy is improving and employment is growing, which bodes well for a homeowner's ability to make mortgage payments.