Distressed Homes Now Selling At A 20 Percent Discount

The housing market recovery stalled last month. At least temporarily.

According to the National Association of REALTORS®, Existing Home Sales slipped 1 percent in April from the month prior, falling to 5.05 million units on a seasonally-adjusted, annualized basis. The reading is exactly in-line with report's 6-month average which also reads 5.05 million units.

The data may appear "average", but there's another angle to consider. 

In April, as compared to March, the supply of existing homes for sales spiked. At the current pace of home sales, it would now take 9.2 months to exhaust today's complete home inventory. This is almost one full month worse than March. It's the worst home supply reading of the year.

There are also more homes "on the market" today than at any time since September 2010.

Other noteworthy statistics in the April Existing Home Sales report include:

• 31 percent of all homes sold in April were purchased with cash
• First-time home buyers bought 36 percent of all homes in April
• Distressed properties typically sold at a 20 percent discount

This "discount", it should be noted, is a major reason why distressed properties accounted for 37 percent of the home resales in April. Home buyers are finding bargains when they're willing to consider homes in various stages of foreclosure and short sale.

Overall, the April Existing Home Sales report represents opportunity for home buyers. Home sales are stagnant, supplies are rising and there's no shortage of properties from which to choose. Furthermore, mortgage rates remain low.

If you're considering a home purchase this fall, home supply may not be as ample, and financing conditions may not be as favorable, post-Labor Day. Talk to your real estate agent about what's possible today. You may want to move up your time frame.

Demand Is Rising, Supplies Are Falling : Home Prices Set To Rise?

Home resales rose 4 percent last month, according to the March Existing Home Sales report. A total of 5.1 million homes were sold on an annualized, seasonally-adjusted basis.

The strong results re-establish the national, long-term trend toward rising home resales.

March marked the 6th month out of eight in which sales volume has increased and sales are up 32 percent from July 2010 lows.

Home supply has resumed its downward trajectory, too.

At the current pace of sales, the entire home resale inventory would be depleted in 8.4 months. This is 0.1 months faster as compared to February, and a full month faster than the 12-month average.

The Existing Home Sales report also included a breakdown by buyer-type.

• First-time buyers bought 33% of homes, down from 34% in February
• Repeat buyers bought 45% of homes, down from 47% in February
• Investors bought 22% of homes, up from 19% in February

35 percent of buyers paid in cash.

And, perhaps most noteworthy, according to the National Association of REALTORS®, 40 percent of March home resales were "distressed properties". Distressed homes include foreclosures, short sales, and REO and typically sell at discounts "in the vicinity" of 20 percent.

Home prices are based on the basic economic theory of Supply and Demand. So, with home supplies dropping and demand for homes rising, it's reasonable to expect home values to rise later this year.

If you're in the market for a home, play the recent trends to your advantage. Today, homes are affordable and mortgage rates are low. This may not be the case later this year. The best "deals" of the year may be what you buy now.

Foreclosure Activity Falls For The Second Straight Month, Drops To 30-Month Low

According to foreclosure-tracking firm RealtyTrac, the number of foreclosure filings nationwide dropped for the second straight month in December. After falling 21 percent in November, filings were down by an additional 2 percent in December.

"Foreclosure filing" is a catch-all term, comprising default notices, scheduled auctions, and bank repossessions.

Like most months, a small number of states dominated December's national foreclosure figures. 6 states accounted for more than 50 percent of all bank repossessions.

1. California : 17% of all repossessions
2. Florida : 11% of all repossessions
3. Arizona : 6% of all repossessions
4. Michigan : 6% of all repossessions
5. Texas : 6% of all repossessions
6. Nevada : 4% of all repossessions

December's foreclosure filings fell to its lowest levels since June 2008, but we can't read into the report too much just yet. Foreclosure volume continue to be dampened by lawsuits and moratoriums related to controversy surrounding the so-called robo-signers.

Foreclosure activity may have lessened in December anyway, but we can't know for certain. 

Distressed properties are in high demand among home buyers, accounting for one-third of all home sales; typically sold at a steep, 15 percent discount as compared to non-distressed properties.

Buying foreclosures can be a terrific "deal".

That said, buying a foreclosed home is different from buying a non-foreclosed home. Specifically, because you're buying from a bank and not a person, contracts may vary from what's "customary" and negotiations may be drawn-out.

It's one reason why buyers  -- first-timers and investors alike -- should talk with a real estate agent before writing an offer for a foreclosed property. You can learn a lot from the internet, but when it comes time to actually purchase a home, you'll want an experienced professional on your side.

Foreclosure Properties and How to Buy Them

A number of people have asked me how to buy a foreclosure property. Of course, the answer begins with "that depends," because foreclosure is a process with several stages through which distressed properties may pass, including:

• Short sales (usually during pre-foreclosure) 
• Last minute fire sales (seller trying to extract a little bit of equity before the property is lost to foreclosure) 
• Foreclosure auctions (bank has just acquired possession and is trying to sell "on the courthouse steps" in order to avoid carrying the property on its books as Real Estate Owned (REO, a nonperforming asset from the perspective of a bank) 
• REO (foreclosed property) sales, after the property has been taken onto the lender's books, the bank having now decided to list and sell the property 
• HUD homes, repossessed by the government.

The the answer is different at each stage, and of course there are other ways to acquire distressed properties not involved in the foreclosure process (such as trust sales, cash for keys, etc.).

A big factor is location.  Where foreclosure properties are scarce, bidders are many (60 at a recent trust auction I attended), meaning any bargain achieved by the buyer will be relatively small, and the risk of bidding too much is great.  Where foreclosure properties are plentiful, you're generally dealing with a depressed marketplace, meaning that prices will be low but so are the prospects for near-term appreciation.

And of course nearly all distressed properties, including foreclosures, are fixer-uppers.

Here's a good overview by CNN Money on the topic of foreclosure-related distressed property sales:: How to buy a foreclosure - May. 4, 2010.  For more info, contact your real estate blogger! - David

Short-sale success strategies | Inman News

What's it take to achieve a successful short sale?

Short-sale success strategies | Inman News

Pretty much what it takes to be successful at anything in real estate: Tenacity, and tenacious, experienced representation! - David

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Foreclosure glut deflates all home sales

I'm often asked whether (or why) distressed property listings and sales (foreclosures, short sales) affect the value of normal properties offered for sale under standard terms.  Here's a commentary on that topic from MarketWatch:

Foreclosure glut deflates all home sales Realty Q&A - MarketWatch

The bottom line is that the market prices homes in light of available substitutes, so distressed properties, though usually in much worse condition than other properties, definitely have an impact in the eyes of buyers, appraisers, and lenders.