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Colorado Springs home auctions slowed in May, but more foreclosures are expected in the coming months as default rates continued to increase in the area.

Based on records from the public trustee office of El Paso County, new foreclosure filings climbed up slightly in May, affirming earlier contention that the county will still reach the 4,000 to 5,000 total of units entering home auction listings this year.

Similarly, the pace of home auctions in Colorado also slowed down in May. It moved out of the top-ten list of state foreclosure rate and its April tenth-ranking was taken by Maryland, where spikes in foreclosures occurred in May. Colorado moved down by two places to 12th.

A total of 4,843 houses in Colorado entered foreclosure in May, a sharp drop of more than 24 percent from April, when 6,382 homes became distressed, and down by 0.7 percent from the total in May last year. The month-over-month decrease rate was much bigger than the 3.3-percent decrease in filings nationwide.

Officials of the Colorado Division of Housing said that the figures reflect economic improvements in Colorado. Although they use a different methodology to track statewide foreclosures than those used by research firms, the resulting trends are similar.

Despite the slowdown in Colorado Springs home auctions in May, there are indications that auctions will rev up again. The default rate for mortgage loans in the area jumped up to 5 percent in April, up from 3.8 percent in April last year. The foreclosure rate also increased to 1.7 percent, up from 1.5 percent one year earlier.

The default rate statewide also increased to 5.4 percent, up from 3.7 percent in April last year. The foreclosure rate climbed up to 1.8 percent, up from 1.5 percent one year earlier.

Since January last year, the default rate and foreclosure rate in Colorado Springs continued to rise month-over-month. With five percent of all Colorado mortgaged homes in default by more than three months, it is expected that Colorado Springs home auctions will step up in the coming months if distressed homes are not rescued.

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The effects of repo homes on rental housing and commercial rentals in Denver are mixed. While a number of foreclosure properties get added to the rental housing inventory and consequently push down rental rates, the foreclosure pace has turned a lot of homeowners into renters, increasing the demand and consequently the rates for rentals.

Additionally, the risk of foreclosure has prevented a number of renters from pursuing their plans of buying homes. Frequent news about Denver foreclosure auctions are developing in them the fear that they could also default and ultimately enter foreclosure.

As of the latest report from the Treasury Department, there are 8,256 Denver homes in the Home Affordable Modification Program, indicating the relatively high number of distressed homes in the Denver-Aurora area. This number of homes at risk of getting posted for foreclosure auction for sale is discouraging a number of renters from buying a home despite the low mortgage rates and low home prices.

Home auctions in Colorado also surged in the first quarter, with 5,303 units of the 16,023 distressed homes purchased back by mortgage lenders during the quarter. Between March and April, the number of repo homes also increased from 2,141 units to 2,147.

In the first quarter, the average rate for rental housing increased slightly over the year from $1,004 to $1,036. The increase was attributed to the drop in residential rental vacancy rate to 3.1 percent, based on data from the Colorado Housing Division. The vacancy rate one year earlier was 3.6 percent while the vacancy rate in the previous quarter was 5.5 percent.

Because of the improvement in rental housing occupancy, the median rental rate in Denver in the first quarter increased to $995, up by 4.7 percent from $950 one year earlier and by 3.1 percent from $965 in the previous quarter.

On the other hand, the still relatively low prices of repo homes have encouraged a number of renters to finally purchase a home. Total house sales shot up by 24 percent over the year.

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Home sales and prices improved in the first months of the year despite the continued entry of homes into Denver foreclosure auctions.

In the first quarter, a total of 710 housing units were repossessed through home auctions for sale in Denver County, accounting for 34.6 percent of the 2,052 foreclosure actions filed in the county during the quarter. It also marked a jump of 22.5 percent from the previous quarter and a spike of 23.8 percent from the first quarter last year.

Meanwhile, total home sales in March spiked to a total of 3,602 units, up by almost 48 percent from 2,436 homes in February and up by 12.4 percent from the 3,206 units sold in March last year.

The median price for single-family houses sold in March was $229,000, a jump of 12.3 percent from the $203,950 median in March last year. The median price for condos also increased by 2.4 percent year-over-year to $131,579.

Analysts contended that first time home buyers were the major drivers of home sales in March as 70 percent of all single-family houses sold were priced lower than $300,000 and most of the condos sold were priced below $200,000.

In the first quarter, of the 5,303 homes that were repossessed through foreclosure auctions in Colorado, 13.39 percent of these or a total of 710 units were bought back by banks through Denver foreclosure auctions. Colorado REOs in turn accounted for 2.06 percent of total REOs nationwide during the quarter.

Local analysts said that jobs and wage increases will be the major factors for a reduction in foreclosure activity in Colorado, particularly in Denver. The unemployment rate in Colorado rose to 7.9 percent in March, up from the February jobless rate of 7.7 percent.

Officials of the state Labor and Employment Department, however, explained that the surge in the statewide jobless rate was a result of the increase in number of people that entered the work force, and not because of further losses in jobs. There were 209,800 residents looking for work in March, down from 211,700 persons in March last year.

Compared to other Colorado counties, Denver County posted the second-highest number of REOs in the first quarter. It was Arapahoe County which posted the highest number with a total of 748 REO units.

A number of analysts contended that the surge in unemployment in the Denver metro area could drive more homes into Denver foreclosure auctions. The metro jobless rate rose to 8.5 percent in March, up by 0.1 percentage point from February.

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Filings for house repos in Colorado decline 7.6 percent in the first three months of this year. And the number of houses that went into completed foreclosures also fell 26.2 percent. Completed foreclosures are properties whose owners went into foreclosure and failed to pay their arrears or negotiate with their lenders for a loan workout to make their accounts current.