Foreclosure Sales Down: 1 in 5 Homes Sold are Now Bank-Owned

Foreclosure Sales Down: 1 in 5 Homes Sold are Now Bank-OwnedForeclosure-related residential sales accounted for nearly half of all homes sold at the peak of the housing crisis, but that figure is down to 21`percent.
A total of 190,121 U.S. properties in some stage of foreclosure or bank-owned (REO) were sold during the first quarter of 2012, a decrease of 18 percent from the previous quarter and down 22 percent from the first quarter of 2012, said RealtyTrac in its new report Thursday.
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.
RealtyTrac said the downward trend in these short sales was a bit unexpected when consider the still high number of homeowners in negative equity, or “underwater” in their mortgage debt versus home value.
But the prospects of even higher home prices in coming months has many borrowers and mortgage servicers reining in short sale activity.
“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 are more willing to endure 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,” Blomquist said.
A lenders will likely see reduced losses from failed short sales 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.
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. This is 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.

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