(6/14/2012) With the glut of foreclosures in the market, reports continue to show that these properties are taking up a greater portion of home sales.
Homes that are in process of foreclosure represented 26 percent of all residential sales during the first quarter, according to RealtyTrac. This is up from 22 percent in the previous quarter and 25 percent in the previous year.
A total of 233,299 foreclosed homes were bought during first quarter, for an average of $161,214. This was 27 percent below the average price of a home not in foreclosure.
Out of the larger number of foreclosed homes purchased, a large percentage were pre-foreclosure sales. These types of “short sales” are often last-ditch efforts to avoid foreclosure by homeowners. These borrowers owe more on their mortgages than the home is worth, and agree with the bank to sell their homes at the lower market value.
Short sales are increasingly preferred by banks for homes facing foreclosure. Banks will usually get 20 percent more from a short sale than if a home goes through the foreclosure process. Plus, short sales occur quickly. In contrast, foreclosures can take years and create additional costs in property taxes and insurance.
Short sales hit a three-year high of 110,000 in first quarter. This represented 12 percent of all homes sold in the first quarter.
At the same time, the average short sale price dropped to a record low of $175,461. This was the lowest level recorded since 2005, when RealtyTrac started tracking foreclosures.
The trend of foreclosures representing a large portion of home sales may continue into the foreseeable future. Reports indicate that foreclosures may be picking up after several consecutive quarterly declines. In fact, banks stand poised to foreclose on approximately 800,000 homes this year according to RealtyTrac.
Foreclosure activity stalled last year after lawsuits and negative press surrounding robo-signing. Many banks temporarily ceased foreclosures. This may be at an end. Banks may be finally attacking their backlog of homes in foreclosure and more aggressively targeting defaulted homeowners.