By Bob Ivry
March 26 (Bloomberg) -- U.S. foreclosure filings last month jumped 12 percent compared with a year ago as owners struggled with declining home values and higher adjustable mortgage rates.
More than 130,000 homes entered foreclosure last month, according to a report from RealtyTrac, an online listing of foreclosed properties. That's the second-highest since RealtyTrac began collecting data in January 2005.
The worst housing slump in more than a decade is pushing down home prices and hampering the ability of owners to refinance mortgages. Borrowers with poor or incomplete credit are also vulnerable to mortgages that are resetting at higher rates than introductory or so-called teaser rates.
``The rise in foreclosures over the past year probably only marks the beginning of the problem,'' Jan Hatzius, a Goldman, Sachs & Co. economist, wrote in a March 23 report. ``The main reason to expect further deterioration is that house prices are likely to fall significantly in 2007, with further declines possible in subsequent years.''
Foreclosures in 2007 may rise by one-third compared with last year should rates continue at the level seen in January and February, RealtyTrac Chief Executive Officer James Saccacio said in a statement today.
New Home Sales Fall
The foreclosures may further swell the number of unsold homes. New home sales in the U.S. unexpectedly fell last month to the lowest level in almost seven years and the supply of unsold homes climbed to the highest in 16 years, the Commerce Department said today.
The Standard & Poor's measure of the largest U.S. homebuilders slid as much as 3.1 percent after the government report. Purchases dropped 3.9 percent to an annual pace of 848,000 last month, less than the gain to 985,000 forecast by economists in a Bloomberg News survey.
One in every 884 U.S. households moved into the foreclosure process, which can range from default notices for late payment to auction sales and bank repossessions, Irvine, California- based RealtyTrac said. Banks typically start foreclosing after payments are 90 days late.
On a month-to-month basis, foreclosures are slowing. The rate at which homes were entering foreclosure decreased in February by 3.9 percent from adjusted January numbers, RealtyTrac said. In January, 136,113 homes entered foreclosure.
Florida reported 19,144 houses entering the foreclosure process in February, the most of any state, RealtyTrac said. It was followed by California, with 16,273, and Texas, with 12,386.
Nevada posted the highest percentage rate last month with one foreclosure filing for every 278 households. Nevada's rate was 77 percent higher than in February 2006, RealtyTrac said.
The state with the lowest rate was Vermont, with one foreclosure filing in February among its 294,382 households.
Washington, D.C. had no foreclosures, according to RealtyTrac.
Interest rates on about $775 billion worth of subprime loans -- those given to borrowers with bad or incomplete credit -- are scheduled to rise in the last nine months of 2007, according to Bear Stearns Cos.
The median U.S. home price was $212,800 in February, 1.3 percent less than a year ago and down 7.6 percent from a record in July.
One-fifth of home loan borrowers have adjustable rate mortgages, according to Credit Suisse Group. About 15 percent of the $9.5 trillion U.S. mortgages are subprime, according to Bear Stearns.
``People who bought homes in the 1980s and 1990s started refinancing their equity out in the 2000s, so we can't assume that foreclosures will only affect people who bought their homes in the last couple of years,'' said Schahrzad Berkland, who publishes the California Housing Forecast in San Diego. ``And a lot of adjustable-rate mortgages were taken out by prime borrowers, so we can't assume that the more qualified borrowers will be immune to losing their homes.''
Most homeowners who enter the foreclosure process do not lose their homes, said Rick Sharga, vice president for marketing at RealtyTrac.
``Of the properties that enter our database as initial notice of default, only 40 percent of them actually go to the auction,'' Sharga said in an interview.
To contact the reporter on this story: Bob Ivry in New York atLast Updated: March 26, . 2007 12:44 EDT