RealtyTrac: Auctions Preferred To Short Sales As Home Prices Rise

Posted by Patrick Barnard on November 26, 2013 No Comments
Categories : Mortgage Servicing

Due to rising home prices and continuing strong demand from institutional investors, auctions are now more popular than short sales for liquidating bank-owned (REO) or foreclosed properties, according to RealtyTrac.

‘After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction sales and bank-owned sales,’ says Daren Blomquist, vice president at RealtyTrac, in a statement. ‘The combination of rapidly rising home prices – along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home – means short sales are becoming less favorable for lenders.’

According to the firm's monthly Foreclosure Sales Report, short sales represented 5.3% of all home sales for October, down from 6.3% in September and down from 11.2% compared to October 2012.

States with the highest percentage of short sales in October included Nevada (14.2%), Florida (13.6%), Maryland (8.2%), Michigan (6.7%) and Illinois (6.2%).

Foreclosure auction sales to third parties – a new category in the report – represented 2.5% of all sales. Although this is down from 2.8% in September, it is nearly twice the 1.3% recorded in October 2012.

Markets with the highest percentage of foreclosure auction sales included Orlando (8.6%); Jacksonville, Fla. (8.6%); Columbia, S.C. (8.1%); Las Vegas (6.6%); Charlotte, N.C. (6.1%); Miami (6.0%); and Tampa, Fla. (5.7%).

Nationwide, REO sales accounted for 9.6% of all sales, up from 8.9% in September and up from 9.4% in October 2012.

States with highest percentage of cash sales included Florida (65.6%), Nevada (55.5%), Georgia (55.4%), South Carolina (53.9%), North Carolina (49.9%), Michigan (49.5%) and Ohio (49.2%).

Institutional investor purchases represented 6.8% of all sales in October – a major drop from a revised 12.1% in September and down from 9.7% a year ago, according to the report.

Markets with the highest percentage of institutional investor purchases included Memphis, Tenn. (25.4%); Atlanta (23.0%); Jacksonville, Fla., (22.2%); Charlotte (14.5%); and Milwaukee (12.0%).

A total of 5,649,965 single-family homes, condominiums and townhouses sold in October – a 2% increase compared to September and up 13% from October 2012, according to the report. Despite this, home sales were down slightly, on a year-over-year basis, in three ‘bellwether’ western states: California (down 15%), Arizona (down 13%), and Nevada (down 5%). October marked the third consecutive month that home sales volume fell in those three states.

The national median sales price of all residential properties – including both distressed and non-distressed sales – was $170,000, unchanged from September but up 6% compared to October 2012.

October marked the 18th consecutive month median home prices have increased on an annualized basis, according to RealtyTrac.

The median price of a distressed residential property – in foreclosure or bank-owned – was $110,000 in October – 41% below the median price of $185,000 for a non-distressed property.

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