Dennis Norman
Average discount on Foreclosure and Bank-Owned Homes is 27 Percent
This morning RealtyTrac released a report stating that 31 percent of all residential sales in the first quarter of 2010 were foreclosure homes or bank-owned homes. They are reporting 233,000 foreclosure and bank-owned homes sold during first quarter 2010 at an average price discount of 27 percent (based upon average sale price of non-foreclosure properties).
This data is fairly consistent with date from the National Association of REALTORS which reported there were right at 1 million existing homes sold in the first quarter of 2010 and roughly 35 percent of those were “distressed” sales. Do the math and this works out to about 350,000 distressed sales which, in addition to foreclosures and bank-owned homes which are counted in RealtyTrac’s numbers, also include short-sales which are very prevalent in many markets.
The bottom line is, distressed sales and foreclosures have a huge impact on the housing market, particularly home prices, and, as I have been saying for some time now, we will not see the housing market stabilize until the foreclosure rate recedes from record levels and starts heading back down toward a “normal” rate the market can live with.
Highlights of the RealtyTrac Report:
- The share of home sales attributable to foreclosures and bank-owned homes for first quarter 2010 was 14 percent less than the previous quarter and down 33 percent from the peak in first quarter of 2009 when these sales accounted for 37 percent of all residential sales.
- The average sales price on properties in some stage of foreclosure decreased 23 percent from 2006 to 2009.
- The average discount on sale prices of foreclosures and bank-owned properties has steadily increased from 21 percent in 2006 to 27 percent in the first quarter of 2010.
- Discounts on Bank-Owned real estate are larger than on pre-foreclosures…although the trend on foreclosures appears to be showing increased discounts as short sales increase.
- Foreclosure sales have increased 2,500 percent from 2005 to 2009.
- More than 1.2 million U.S. properties that were in some stage of foreclosure were sold to third-parties in 2009, an increase of 25 percent from 2008 and an increase of nearly 327 percent from 2008.
- Nevada, California and Arizona had the highest percentage of foreclosure sales in the first quarter of 2010.
- Ohio, Kentucky and Illinois had the highest price discounts on foreclosures in first quarter 2010.
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