Foreclosure Sales Fall in Fourth Quarter 2010. Asterisks Noted
Despite a sizeable drop in the fourth quarter, sales of foreclosed properties again accounted for over a quarter of all single-family home sales in 2010. Sales of foreclosed homes represented almost 26 percent of all sales during the year, down from 29 percent in 2009. The discount buyers received for these homes was 28 percent off the average sale price of a non-foreclosed property compared to a 27 percent discount in 2009.
The RealtyTrac Year and Q4 2010 U.S. Foreclosure Sales ReportTM released on Thursday states that a total of 831,574 residential properties that had either been foreclosed or were in some stage of foreclosure were sold to third parties during the year. This was a 31 percent drop in these sales from the 2009 level, but was a larger market share as the volume of non-foreclosed property sales dropped 19 percent from 2009 figures.
During the fourth quarter, sales of foreclosed homes dropped 22 percent and were down 45 percent from a year earlier however they reflected the lower sales figures for all homes during the period and still accounted for 26 percent of total sales. The average discount was 28 percent, identical to the year-long average.
Here is where the asterisks come into play...
"Foreclosure sales in the fourth quarter faced the twin headwinds of the expired homebuyer tax credit - which began to stifle sales volume during the third quarter - and the foreclosure documentation controversy, which hit in the fourth quarter and temporarily froze sales of foreclosures from several major lenders," said James J. Saccacio, chief executive officer of RealtyTrac.
"Given those factors, it's not surprising that in the fourth quarter foreclosure sales volume hit its lowest level since the first quarter of 2008. Still, foreclosures continue to represent a substantial percentage of all U.S. residential sales and continue to sell at an average sales price that is significantly below the average sales price of properties not in foreclosure - the result of a bloated supply of foreclosures and weak demand from homebuyers." Saccacio continued, "The catch-22 for 2011 is that while accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices."
RealtyTrac also breaks out sales by their foreclosure status. Homes that were foreclosed and in bank owned (REO) inventory represented 16 percent of all sales. A total of 512,886 properties were sold out of inventory in 2010 at an average discount of 36 percent. Inventory sales in 2009 represented a 32 percent market share and sold at an average discount of 33 percent.
The other category is homes in default or scheduled for auction. These are usually described as short sales - transactions in which the bank receives less than the principal balance of the mortgage - although not all meet that definition. In 2010 318,688 pre-foreclosure properties sold, a decrease of 30 percent from the previous year. In 2010 the average discount was 15 percent; in 2009 it was 17 percent. Pre-foreclosure sales were 10 percent of all sales in 2010 and 11 percent in 2009.
In the fourth quarter, a total of 95,683 REO properties (17 percent market share) and 53,620 pre-foreclosure properties (10 percent market share) sold to third parties. REO market share was down 17 percent from the third quarter and 43 percent from the fourth quarter of 2009. Pre-foreclosure market share was down 29 percent from the 3rd quarter and 49 percent year over year. The REO discount was 37 percent and the pre-foreclosure discount was a little under 13 percent.
As is always the case, Nevada, Arizona, and California led the nation in foreclosure sales during the year. In Nevada 57 percent of all sales were homes in some state of foreclosure, a decrease from 67 percent in 2009. Market share in Arizona dropped from 54 percent in 2009 to 49 percent in 2010, and in California sales were down from a peak of 57 percent in 2009 to 44 percent last year.
Other states where foreclosure sales accounted for at least one-quarter of all sales in 2010 were Florida (36 percent), Michigan (33 percent), Georgia (29 percent), Idaho (28 percent), Oregon (28 percent), Illinois (26 percent), Virginia (25 percent), and Colorado (25 percent).
There were 10 states where the discounts on REO properties were greater than 35 percent in 2010; leading were Ohio (43 percent) and Kentucky (40 percent). Other states on the list were Tennessee, California, Pennsylvania, Illinois, New Jersey, Michigan, Georgia, and Wisconsin.