Distressed Property Sales, Discounts Steady in Third Quarter

Sales of distressed homes, those in some stage of foreclosure or bank owned (REO), accounted to 20 percent of all U.S. home sales during the third quarter of 2011 compared to 22 percent of sales in the second quarter according to information released Thursday by RealtyTrac.  One year earlier such distressed sales represented 30 percent of the housing market.

There were 221,536 such distressed property sales to third parties, 11 percent fewer than revised second quarter figures and 5 percent fewer than in the third quarter of 2010.  Pre-foreclosure sales (generally referred to as short sales) totaled 92,824 sales or 9 percent of all sales, down 9 percent from the second quarter and nearly identical to the number one year earlier when pre-foreclosure sales represented 12 percent of the market.  Sales of REO totaled 128,712 properties, down 13 percent quarter over quarter and 8 percent from the previous year.  REO sales made up 12 percent of all sales in the quarter compared to 13 percent in Q2 and 18 percent of sales a year earlier.

Prices for distressed homes averaged $165,322, up one percent from Q2 but down 3 percent from one year earlier.  The average discount from the market price for distressed properties was 34 percent, the same as in the second quarter of 2011.  The discount one year earlier averaged 37 percent.  There were substantial differences, however, between the prices for pre-foreclosure properties which averaged $191,119, a discount of 24 percent below the average market price, and REO.  The latter had an average sales price of $146,437 in the third quarter, a discount of nearly 42 percent, unchanged from Q2 and down from 45 percent a year earlier.  In the second quarter the discount for pre-foreclosed properties was 23 percent and was it 24 percent in the third quarter of 2011. 

In six states distressed properties sales accounted for a larger share of the market than the 20 percent national average.  The states were Nevada (57 percent), California (44 percent), Arizona (43 percent), Georgia (34 percent), Colorado (26 percent) and Michigan (23 percent).

The states with the largest discounts for distressed property sales were Missouri (56.5 percent) and Massachusetts (51 percent.)