Foreclosed and pre-foreclosed homes
maintained their position as the source of over a fifth of U.S. home sales in
the second quarter of 2012. Twenty-three
percent of all residential sales during the period were of bank-owned
properties (REO) or homes in some stage of foreclosure, up from 22 percent in
the first quarter of the year and 19 percent in the second quarter of 2011. RealtyTrac, an Irvine, California firm that
tracks foreclosure activity, reported that an additional 14 percent of all
sales were short sales, where the bank agreed to a payoff lower than the actual
outstanding mortgage balance, that were unrelated to foreclosures.
RealtyTrac's second quarter U.S. Foreclosure Sales Report noted that
the market share of distressed sales increased even though the actual number of
those sales fell 12 percent from the previous quarter and 22 percent from a
year earlier. A total of 224,429
foreclosure-related transactions were completed during the quarter.
The number of pre-foreclosure sales
(short sales) continued to rise relative to sales of REO. Foreclosure related short sales accounted for
107,298 of the distressed sales during the quarter, only 9,733 fewer than bank-owned
property sales, the smallest difference between the two since 2007. Eleven percent of all sales during the second
quarter were pre-foreclosure sales, up from 8 percent in Q2 2011, and these outnumbered
REO sales in 13 states and the District of Columbia. The 117,131 sales of REO represented 12
percent of all sales in the quarter, unchanged from Q1 and one point higher
than Q2 2011.
For the first time since the second
quarter of 2010 there was an annual increase in the sales price of distressed
homes. The average price of $170,040
reflected a 6 percent increase from the first quarter and 7 percent from the
previous year. It was also the largest
bump in average price since late 2006.
The average price represented a discount of 32 percent from that of a
non-foreclosure home, up from a 30 percent discount in both the previous
quarter and a year earlier.
Pre-foreclosure sales closed at an
average price of $185,062, a five percent increase from the previous quarter
which had represented a low point in RealtyTrac reporting history, but the
price was still 1 percent lower than a year earlier. These sales were at an average discount of 26
percent from a market rate sale, up from a 24 percent discount in Q1 and an 18
percent discount in Q2 2011.
Bank-owned real estate sold for an average
price of $155,892, 6 percent higher than in the first quarter and 10 percent
above the price in the same quarter of 2011.
This represented an average discount of 37 percent unchanged from the
first quarter and slightly below the 38 percent discount a year earlier. The
highest discounts for distressed property sales were recorded in Texas (41.64
percent) and Massachusetts (40.12 percent).
"The second quarter
sales numbers provide solid statistical evidence of what we've been hearing
anecdotally from real estate agents, buyers and investors over the past few
months: there is a limited supply of available foreclosure inventory to choose
from in many markets," said Daren Blomquist, RealtyTrac Vice President. "Given
this shortage of supply and the seasonally strong buyer demand in the second
quarter, it's no surprise that the average foreclosure-related sales price
increased both on a quarterly and annual basis.
"Three straight months
of increasing foreclosure starts through July may ease the inventory shortage
somewhat in the coming months when many of these foreclosure starts translate
into listed short sales or bank-owned homes," Blomquist added. "The increase in
short sales of properties that have not even started the foreclosure process
indicates that lenders are moving further upstream to deal with their
distressed inventory, thereby avoiding the increasingly complex and lengthy
foreclosure process altogether."
Short sales took an
average of 319 days to sell after starting the foreclosure process, up from 306
days in the previous quarter and 245 days in the second quarter of 2011. It
took an average of 195 days for REOs to sell after completing the foreclosure
process, up from 178 days in both the first quarter and a year earlier.
increased on a year-over-year basis in 16 states, including Michigan (42
percent increase), Illinois (35 percent increase), Connecticut (27 percent
increase) and Massachusetts (27 percent increase).
Foreclosure sales accounted
for 43 percent of all residential sales in both Georgia and Nevada in the
second quarter, the two highest percentages among the states despite decreasing
foreclosure-related sales activity in both states.