Georgia posted the nation's highest foreclosure rate in May, with one in 300 housing units subject to a notice or repossession, data released Thursday by a real estate firm showed.
It was the first time since early 2006, when the overheated housing market had just started to cool, that the state led the nation in the rate of foreclosures.
Now, the unwelcome distinction comes as a measure of metro Atlanta's lagging recovery. Experts say there's reason to believe that 2012 will mark a turn for the housing market nationally, and there have been encouraging signs here as well as both overall sales volume and new home construction starts have ticked up.
But the glut of foreclosed homes remains a drag on average prices, keeping many would-be sellers on the sidelines and leaving other homeowners fearful about the value of a major asset. While monthly foreclosure figures can be volatile, analysts said they are an important indicator.
Thursday's report by real estate research firm RealtyTrac showed Georgia foreclosure activity in May soared 33 percent from the previous month and 30 percent from a year ago, boosting the state past Arizona, Florida, California and Nevada.
Nationally, one in 639 homes was tagged with a foreclosure filing during May.
Metro Atlanta had the second-highest foreclosure rate among the 20 largest metro areas in May, with one in 224 housing units subject to a filing or repossession, a rate that trailed only the Riverside-San Bernardino, Calif., market.
"The housing market in Georgia seems to be weaker," said Daren Blomquist of RealtyTrac. "We're seeing other markets showing signs of stabilization, with foreclosure markets trending downward, but we're not seeing that in Georgia."
Equity Depot, a Kennesaw-based real estate analysis firm that also tracks foreclosure data, said its figures paint a different picture. Chief executive Barry Bramlett said he hasn't seen a similar increase in foreclosure notices in metro Atlanta, although the monthly numbers remain about double what they were in healthier economic times.
"It's been extremely consistent over the last 15 months," he said.
Meanwhile, a report Thursday by Harvard University's Joint Center for Housing Studies offers hopeful signs for the national market, including improving sales of existing homes combined with modest jumps in single-family construction starts.
Eric Belsky, the center's managing director, concluded that "a floor is beginning to form under home prices."
Realtors and analysts in Atlanta said they've noticed similar optimistic signs in the local market. New home construction has risen for four straight months when compared to the same time last year, according to figures released this week by Atlanta-based Smart Numbers. According to that firm, the average price for resales is up slightly, as are lot prices.
"It's not a robust market, you know that," said Steve Palm, the firm's president, at a conference this week. "We have a long, long way to go. It took five years to go down, and it could take a few years to go back up. But we're finally seeing some positives."
He added: "We've turned the corner. Everything's improving, and hopefully this will continue."
However, The Atlanta Journal-Constitution's annual analysis of home prices found that metro home prices plummeted nearly 15 percent across the region in 2011 even as the number of homes for sale dropped to a 10-year low. And this winter the metro region showed nation-leading price declines in the widely watched Case Shiller Home Price Indices report, which tracks repeat sales over time.
Low values are keeping many would-be sellers on the sidelines, leaving distress sales to dominate the market.
Georgia's foreclosure rate -- which has been among the nation's worst throughout the housing bust -- could be higher of late because banks are more often filing notices as a shot across the bow to delinquent borrowers to try to arrange a short sale, said Jude Rasmus, president of Marietta-based Rasmus Real Estate Group, which specializes in distressed real estate sales.
Not all foreclosure notices result in repossessions. Homeowners sometimes work out deals with lenders that enable them to keep their homes.
The high number of foreclosures hasn't discouraged some buyers, particularly those who are seeking to take advantage of low-interest rates and rock-bottom deals.
"The activity is out there, and interest rates are historically low," said Bill Murray, the managing broker for Prudential Georgia Realty's Buckhead office. "Buyers are finally realizing that they may have missed the optimal time."
The main bright spot in the national housing data has been the rental market, where demand has soared partly due to tighter credit that keeps some people from getting mortgages. The number of renters has surged by 5.1 million this decade, with growth fueled by young, minority and low-income households who are traditionally more likely to rent. That number is only likely to grow as more young people in Atlanta and elsewhere venture out on their own as the economy recovers.
"Things are looking up. We are stabilizing. I'm seeing sales, I'm seeing tear-downs and I'm seeing renovations," said Jim Grissett of Parthenon Group, an investment management firm focusing on real estate securities. "We're reaching an uneasy equilibrium where we are meting out supply to meet the demand that does exist.
-- Scott Trubey contributed to this article.
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