Consumers are less willing to buy foreclosed properties today than they were one year ago, a new survey finds.
According to a Harris Interactive survey conducted on behalf of Trulia.com and RealtyTrac, 45% of U.S. adults age 18 and above are at least somewhat likely to consider purchasing a foreclosed home in the future, compared to the 55% of U.S. adults age 18 and above surveyed online by Harris Interactive last year.
Survey respondents were also asked about the likelihood of their strategically defaulting on a mortgage obligation. Only 1% of homeowners with a mortgage say that walking away from their home would be their first choice if they were unable to pay their mortgage. If their mortgage were to fall into a negative-equity position, 41% would at least consider walking away, while 59% would not consider walking away no matter how much their mortgage was underwater.Â
"It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble," says Trulia's co-founder and CEO Pete Flint. "Combined with decreased consumer interest around purchasing a foreclosure, it may take even longer than anticipated to see true health return to the real estate market."
In terms of price discounts on bank-owned homes, 18% of adults surveyed expect REOs to be priced at a discount of less than 25% off the value of a similar home that is not in foreclosure.
However, not all consumers have realistic expectations, the survey shows. Thirty-six percent of respondents say they expect to receive a discount of 50% or more when purchasing a bank-owned property. Most consumers – 95% – would expect to pay less for a foreclosed home than for a similar home for sale that is not in foreclosure.
The current survey also found lower levels of negative sentiment towards purchasing foreclosed properties than one year ago, with 78% of U.S. adults believing there are downsides to buying foreclosed properties compared to 85% in May 2009.
According to RealtyTrac data, distressed sales accounted for more than 30% of total home sales in the first quarter.
The majority of U.S. adults – 92% – said they would be willing to invest in improvements, such as renovations and remodeling, if they purchased a foreclosed home. Of those consumers who would be willing to invest in improvements, 65% would be willing to invest 20% or less of the purchase price to upgrade the property and make it their own.Â Â Â Â
Renters are showing strong interest in buying foreclosed properties, with 57% at least somewhat likely to purchase a foreclosed home in the future. In comparison, only 40% of current homeowners would consider buying a foreclosure in the future.
Additionally, the likelihood to consider purchasing a foreclosure decreases with age: 65% of renters ages 18-34, 63% of renters between the ages of 35-44, and 54% of renters ages 45-54 are at least somewhat likely to consider purchasing a foreclosure, compared to only 31% of renters 55 years and older.
SOURCES: Harris Interactive, Trulia.com, RealtyTrac