Aug. 21 (Bloomberg) — U.S. homes facing foreclosure almost doubled in July as property owners with adjustable-rate mortgages saw their payments rise, RealtyTrac Inc. said.

Lenders sent 179,599 notices of default, scheduled auctions or bank repossessions last month, a 93 percent increase from a year earlier, Irvine, California-based RealtyTrac said today in a statement. California, Florida, Michigan, Ohio and Georgia accounted for more than half of the country’s total filings.

An increase in foreclosures will add more homes to the market and further erode values. U.S. home sales dropped to a four-year low in the second quarter and prices fell in a third of U.S. cities, according to the National Association of Realtors. In June, a nearly nine-month supply of houses was on the market, up from a four-and-a half-month supply two years ago.

“We are estimating that we will see about 2 million foreclosure filings this year,” said Rick Sharga, RealtyTrac’s executive vice president for marketing. “We honestly don’t see it getting much better before it gets a little bit worse.”

Forty-three states had year-over-year increases in foreclosure activity, RealtyTrac said. Foreclosures undermine the confidence of mortgage bond investors by revealing property values as lower than the loans they collateralize, said Keith Shaughnessy, president of Foundation Mortgage Corp. in Littleton, Massachusetts.

California, Florida

California foreclosure filings totaled 39,013 in July, about triple the previous year. The state led the nation in foreclosure for the seventh consecutive month, RealtyTrac, a seller of foreclosure data, said.

Florida ranked second with a 78 percent increase to 19,179 foreclosure filings. Michigan replaced Ohio as the state with the third highest number foreclosures: 13,979.

Nevada ranked the worst with one foreclosure filing for every 199 homes, about three times the national average. Georgia’s rate jumped from eighth to second highest in the country with one foreclosure filing for every 299 households.

Defaults on subprime mortgages, those to buyers with poor or limited credit histories, will continue driving up foreclosures through 2008, Sharga said, citing pending interest changes on adjustable-rate loans homeowners took out in 2005 and 2006.

“If they default like the subprimes have been defaulting this year, we won’t be out of the woods for another nine to 12 months,” he said.

Source:

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