1 In 5 Real Estate Sales Are From Foreclosures

RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure properties and real estate data, today released its Q1 2013 U.S. Foreclosure & Short Sales Report™, which shows a total of 190,121 U.S. properties in some stage of foreclosure or bank-owned (REO) were sold during the quarter, a decrease of 18 percent from the previous quarter and down 22 percent from the first quarter of 2012.

These foreclosure-related sales accounted for 21 percent of all U.S. residential sales during the first quarter, down from 25 percent of all sales in the first quarter of 2012 and down from a peak of 45 percent of all sales in the first quarter of 2009.

Properties not in foreclosure that sold as short sales in the first quarter accounted for an estimated 15 percent of all residential sales — bringing the total share of distressed sales during the quarter to 36 percent. Non-foreclosure short sales also trended lower in the first quarter, down 10 percent from the previous quarter and down 35 percent from the first quarter of 2012.

“We expected foreclosure-related sales to be lower given the downward trend in new foreclosure activity nationwide over the past two and a half years, but the decrease in non-foreclosure short sales was a bit of a surprise given the 11 million homeowners nationwide still underwater,” said Daren Blomquist, vice president at RealtyTrac. “Rising home prices in many markets are stunting the continued growth of short sales by reducing incentive for both underwater homeowners and lenders. Underwater homeowners may be willing to stick it out a few more months or even years in the hope that they will be able to walk away with money at the closing table and without a hit to their credit rating, and for lenders a failed short sale may no longer translate into bigger losses down the road given that average prices of bank-owned homes are rising — at a faster pace than non-distressed home prices in many markets.”

 

Other high-level findings from the report:

• States with the biggest percentage of foreclosure-related sales were Georgia (35 percent), Illinois (32 percent), California (30 percent), Arizona (28 percent), and Michigan (28 percent). States where foreclosure-related sales account for less than 10 percent of all sales include Massachusetts, New York, and New Jersey.

• The average price of a foreclosure-related sale was $167,095 in the first quarter, down 1 percent from the previous quarter but up 3 percent from a year ago — the fourth straight quarter with an annual increase in the average price of foreclosure-related sales.

• Markets with the biggest annual increases in the average price of foreclosure-related sales included San Jose, Calif., (up 30 percent), Dayton, Ohio, (up 27 percent), Phoenix (up 26 percent), Las Vegas (up 23 percent), and Sacramento, Calif., (up 21 percent).

• The average price of a property in foreclosure was 30 percent below the average price of a non-foreclosure property in the first quarter, down from a 31 percent discount in the fourth quarter but up from a 28 percent discount in the first quarter of 2012.

• Both pre-foreclosure sales and bank-owned sales decreased from the previous quarter and a year ago. Pre-foreclosure sales accounted for 10 percent of all residential sales in the first quarter, and bank-owned sales accounted for 11 percent of all residential sales.

• States with the biggest percentages of non-foreclosure short sales were Rhode Island (44 percent), Connecticut (42 percent), Massachusetts (40 percent), Nevada (29 percent), Florida (26 percent), and Ohio 24 percent.

Local market perspectives from the RealtyTrac Broker Network
Following are perspectives on distressed sales trends provided by brokers from various parts of the country who are part of the RealtyTrac Broker Network.

“Clearly in metropolitan New York we have entered into a period of stability in the pre-foreclosure market,” said Emmett Laffey, CEO of Laffey Fine Homes, which covers Long Island and the five boroughs of New York city. “In metro New York foreclosure sales represent 8 percent of the market, which is now close to historic foreclosure levels for any market over the last decade.  It's a good sign.”

“Most of the foreclosure properties are purchased by investors at the courthouse auctions and are paid for in cash, which is not possible for the average buyer looking for a home to live in,” said Rich Cosner, president of Prudential California Realty, covering Orange, Riverside and San Bernardino counties in Southern California. “Even investors at the courthouse auctions are bidding up the prices to the point that there is a greatly reduced opportunity to flip a property in a short period of time. Most of the investors today are buying the property, fixing it up and renting it out and hoping to have a great profit in three to five years.”

“It’s not surprising that foreclosure-related sales are down in Oklahoma because home prices are rising so rapidly,” said Sheldon Detrick CEO of Prudential Detrick/Alliance Realty in Oklahoma City and Tulsa. “In fact, short sales are disappearing from the marketplace entirely. Oklahoma City is the strongest market in the state and will continue to grow in the aftermath of the tornado that ripped through the area destroying over 10,000 homes. Right now there is nothing available to rent from cars to houses to furniture. Demand is drying up any and all inventory in the area.”

“We are seeing foreclosures and foreclosure sales decrease in the Reno area and we anticipate that the trend will continue,” said Craig King, COO of Chase International brokerage covering the Reno, Nev., and Lake Tahoe markets. “Typically, we would have four or five times the amount of inventory on the market so demand is driving home prices in the area up. REO sales are significantly less in the Reno Sparks area than other markets in the west. The market here is strong and we are mimicking similar growing markets such as Sacramento and Las Vegas.”

Foreclosure sales in 20 largest metro areas
Foreclosure-related sales accounted for 38 percent of all sales in the Atlanta metro area, the highest percentage among the nation’s 20 largest metropolitan statistical areas in terms of population.

Other metros where foreclosure-related sales accounted for at least 25 percent of all sales were Riverside-San Bernardino in Southern California (35 percent), Chicago (35 percent), and Detroit (30 percent), Los Angeles (29 percent), Miami (28 percent), Tampa (27 percent), Phoenix (27 percent), San Diego (26 percent), Minneapolis (26 percent), Seattle (25 percent), and San Francisco (25 percent).

Pre-foreclosure sales down nationally after surging in 2012, up in 13 states
Third parties purchased a total of 88,750 pre-foreclosure residential properties — in default or scheduled for auction — in the first quarter of 2013, down 20 percent from the fourth quarter of 2012 and also down 20 percent from the first quarter of 2012. It was the lowest quarterly number of pre-foreclosure sales since the third quarter of 2009. Pre-foreclosure sales hit a record annual high in 2012, with 454,727 during the year.

Pre-foreclosure sales accounted for 10 percent of all residential sales in the first quarter, the same as the previous quarter but down from 11 percent of all sales in the first quarter of 2012.

Despite the national decrease, pre-foreclosure sales increased annually in 13 states, including Washington (up 76 percent), Illinois (up 36 percent), Maryland (up 35 percent), and Pennsylvania (up 15 percent).

In the first quarter of 2013, pre-foreclosure properties sold for an average price of $187,040, down 1 percent from the previous quarter but up 5 percent from the first quarter of 2012 — the second consecutive quarter with an annual increase in average price of a pre-foreclosure property. States with double-digit annual increases in average pre-foreclosure sales prices included Nevada (up 23 percent), Arizona (up 20 percent), Florida (up 13 percent), California (up 12 percent), and New York (up 11 percent).

The average price of a pre-foreclosure residential property in the first quarter was 22 percent below the average price of a non-foreclosure residential property, down from a 23 percent discount in the fourth quarter but up from a 20 percent discount in the first quarter of 2012.

Pre-foreclosure homes that sold in the first quarter took an average of 382 days to sell after starting the foreclosure process, up from an average of 336 days in the previous quarter and up from an average of 306 days in the first quarter of 2012.

REO sales down to lowest level in five years
Third parties purchased a total of 101,371 bank-owned properties in the first quarter of 2013, down 16 percent from the fourth quarter of 2012 and down 23 percent from the first quarter of 2012. The first quarter total was the lowest quarterly number of REO sales since the first quarter of 2008.

REO sales accounted for 11 percent of all residential sales during the quarter, the same as in the previous quarter but down from 13 percent of all sales in the first quarter of 2012.

Despite the decrease nationwide, REO sales in the first quarter increased annually in 11 states, including Ohio (up 48 percent), North Carolina (up 46 percent), Illinois (35 percent), Missouri (27 percent), and Florida (12 percent).

In the first quarter of 2013, REO properties sold for an average price of $147,810, down 1 percent from the previous quarter but up 1 percent from a year ago — the fourth consecutive quarter with an annual increase. States with the biggest annual increases in average REO sales prices included Georgia (up 29 percent), Arizona (up 24 percent), Nevada (up 22 percent), California (up 22 percent), and Missouri (up 17 percent).

The average price of an REO residential property in the first quarter was 38 percent below the average price of a non-foreclosure residential property, down from a 39 percent discount in the previous quarter but up from a 34 percent discount in the first quarter of 2012.

REOs that sold in the first quarter took an average of 168 days to sell after being foreclosed, down from the 178-day average from both the previous quarter and a year ago.

Non-foreclosure short sales
Short sales (where the sales price was below the estimated amount of all outstanding loans for a given property) of properties not in foreclosure accounted for an estimated 15 percent of all U.S. residential sales during the first quarter of 2013 but total volume of non-foreclosure short sales in the first quarter was down 10 percent from the previous quarter and down 35 percent from the first quarter of 2012.

States with the biggest percentages of non-foreclosure short sales included Rhode Island (44 percent), Connecticut (42 percent), Massachusetts (40 percent), Nevada (29 percent), Florida (26 percent), and Ohio (24 percent).

Major markets with the biggest percentages of non-foreclosure short sales included Boston (38 percent), Cleveland (33 percent), Memphis (32 percent), Las Vegas (32 percent), and Detroit (30 percent).

The average market value of homes sold via short sale in the first quarter was $178,392, down 4 percent from the previous quarter but up 5 percent from the first quarter of 2012. States with the highest average market value of first quarter short sales included New York ($476,292), Hawaii ($438,563), Massachusetts ($313,831), Connecticut ($276,452), and California ($247,618).

Report methodology
The RealtyTrac U.S. Foreclosure Sales Report is produced by matching national address-level arms-length sales deed data against RealtyTrac’s foreclosure database of pre-foreclosure (NOD, LIS), auction (NTS, NFS) and bank-owned (REO) properties. A property is considered a foreclosure sale if a sales deed is recorded for the property while it was actively in some stage of foreclosure or bank-owned. Previous quarterly numbers may be revised upon the issuance of a new quarterly foreclosure sales report because of new sales deed data received by RealtyTrac. The foreclosure discount is calculated by comparing the percentage difference between the average sales price of properties not in foreclosure to the average sales price of properties in some stage of foreclosure or bank-owned. States without sufficient foreclosure sales data to calculate average prices are not included in the report.

Glossary of Terms
Foreclosure (FC) sale: a sale of a property that occurs while the property is actively in some stage of foreclosure (NOD, LIS, NTS, NFS or REO). This includes only sales to third-party buyers or investors. It does not include property transfers from the owner in default to the foreclosing bank or lender.

REO sale: a sale of a property that occurs while the property is actively bank owned (REO).

Pre-foreclosure sale: a sale of a property that occurs while the property is actively in default (NOD, LIS) or scheduled for foreclosure auction (NTS, NFS).

Pct. of all sales: total number of Foreclosure Sales (or Pre-Foreclosure Sales or REO Sales) as a percentage of all residential sales during the quarter or year.

Avg. FC sales price: the average sales price of Foreclosure Sales (including both Pre-Foreclosure Sales and REO Sales) during the quarter or year, excluding sales with no sales price.

Avg. FC discount: the percentage difference between the average sales price of foreclosure sales and the average sales price of non-foreclosure sales during the quarter or year.

Avg. REO discount: the percentage difference between the average sales price of REO sales and the average sales price of non-foreclosure sales during the quarter or year.

Avg. pre-foreclosure discount: the percentage difference between the average sales price of pre-foreclosure sales and the average sales price of non-foreclosure sales during the quarter or year.

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