According to data released by RealtyTrac, 31 percent of all residential properties that sold in the first quarter of 2010 were in some stage of foreclosure.  Even more telling, those homes sold at an average sales price nearly 27 percent below the average price of properties that were not in foreclosure.

With over 5 million homeowners seriously delinquent (over 90 days) and another 7 million so severally underwater that strategic defaults become an inescapable reality - it‘s reasonable to expect that foreclosures will continue to be a large percentage of aggregate home sales for the next 12-24 months.

James J. Saccacio, chief executive officer of RealtyTrac said, "First time homebuyers and investors continue to buy foreclosure properties in large numbers, and at substantial discounts....As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration"

The increasing adoption of short sales as a loss mitigation tool by investors is very likely to exacerbate the problem when you consider that short sales, unlike foreclosures (generally), are used as comparable properties for the purposes of property valuations used in refinances, modifications, and sales. Surprising to some, the 2008 vintage of conventional and Alt-A mortgages are performing nearly as poorly as their 2006 and 2007 brethren, which adds to the denominator of distressed homeowners further depressing values.