Posts Tagged ‘REOs’

Foreclosed Homes Total a Three-Year Supply

Tuesday, June 14th, 2011

The current national inventory of foreclosed homes represents a three-year supply, according to RealtyTrac.  Not surprisingly, that is depressing home prices.  “This is very bad for the economy,” said Rick Sharga, a RealtyTrac spokesman.

In Las Vegas, the foreclosure situation is so dire that more than half of all homes sold in Nevada are foreclosures.  In California and Arizona, 45 percent of sales are foreclosures; that totals 28 percent of all existing home sales during the 1st quarter of 2011.

Additionally, the nation’s stock of foreclosed homes are selling at deep discounts, particularly REOS, which are bank-owned homes.  The typical REO sold for about 35 percent less than comparable properties, according to RealtyTrac.  In some areas, the discounts were ever steeper: In New York, the discount for REOs was 53 percent during the 1st quarter and almost 50 percent in Illinois, Ohio, and Wisconsin.

“Short sales,” homes where the selling price is less than what is owed by the borrowers, are also dragging down the market.  These sell for an average nine percent discount.  When you consider both REOs and short sales, Ohio had the biggest discount of any state, at 41 percent.

During the 1st quarter, there were 158,000 sales involving distressed properties nationally, less than half the nearly 350,000 during the same period of 2009.  With the slower pace of sales, it will take three years to sell off the inventory of 1.9 million distressed properties, according to Sharga.  “Even if you look at REOs alone, it will take 24 months to clear them and that’s without any new foreclosures at all coming into the system,” he said.

RealtyTrac found that the average sales price of properties in some stage of foreclosure, scheduled for auction or bank-owned — was $168,321, down 1.89 percent from the 4th quarter of 2010.

A total of 158,434 bank-owned homes and those in some stage of foreclosure were purchased during the 1st quarter, a 16 percent decline from the 4th quarter of last year and down 36 percent from the 1st quarter 2010 total.  Bank-owned properties that sold in the 1st quarter had been repossessed an average of 176 days before the sale, while properties that sold in earlier stages of foreclosure in the 1st quarter were in foreclosure an average of 228 days before they were sold.  According to James J. Saccacio, chief executive officer of RealtyTrac, “While this is probably helping to keep home prices relatively stable, it is also delaying the housing recovery.  At the first quarter foreclosure sales pace, it would take exactly three years to clear the current inventory of 1.9 million properties already on the banks’ books, or in foreclosure.”

Foreclosures are particularly attractive to all-cash buyers who demand discounts,  pushing down the value of all properties.  More than 75 percent of American cities experienced price declines in the 1st quarter.  Bank-owned homes totaled 107,143 sales in the 1st quarter, down 11 percent from the 4th quarter and almost 30 percent from 2010.  Sales of homes in default or scheduled for auction totaled 51,291, a 26 percent decline, according to RealtyTrac.  That was less than half the peak of 348,629 distressed deals in the 1st quarter of 2009.

Writing on the website 24/,  Douglas A. McIntyer offers an interesting perspective.  “Any economist will say that when some homes are sold at 27 percent below the normal market, all home prices will be pulled lower.  That may be the key to the home market recovery.  Foreclosure inventory will continue to rise as banks put more backlogged homes onto the market.  The glut will probably push down the average of all homes by several percent. This may be a reason home prices are predicted to fall another 10 percent this year.  Buyers will not come back to the housing market until they believe that prices are too good to resist.  That may mean homes that sold for $500,000 in 2005 will have to sell for $300,000 next year.  Prices will not be driven down quickly without the reduction in inventory of foreclosed homes.  There has to be a bottom to prices.  The sooner it is found the better.  The housing market is more than half dead.  The only tonic is a belief by buyers that prices are so remarkably low that new buyers will make money on a house and not lose it.  If the housing market is to continue to drop, the drop needs to be swift.  Mortgage rates are near all-time lows.  Inflation and concerns about the value of Treasuries due to the U.S. national deficit could change that.  Home prices that are viewed as affordable need to be married with low mortgage rates for the market to catch fire.”

Foreclosures Are Down, So Why Isn’t That Good News?

Tuesday, June 7th, 2011

There’s good news and bad news about foreclosures.  Although the number of foreclosures fell to their lowest rate in 4 ½ years in April, the reason is a delay in processing the orders, not because Americans are experiencing less trouble paying their mortgages.  “Foreclosure activity decreased on an annual basis for the seventh straight month in April, bringing foreclosure activity to a 40-month low,” James J. Saccacio, chief executive officer of foreclosure data company RealtyTrac, said.  “This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure.”

According to Saccacio, “The first delay occurs between delinquency and foreclosure, when lenders and services are no longer automatically pushing loans that are more than 90 days delinquent into foreclosure but are waiting longer to allow for loan modifications, short sales and possibly other disposition alternatives.  Data from the Mortgage Bankers Association shows that about 3.7 million properties are in this seriously delinquent stage.  The second delay occurs after foreclosure has started, when lenders are taking much longer than they were just a few years ago to complete the foreclosure process.”

Nationally, homes typically are taking 400 days to go from the initial default notice to bank repossession, an increase when compared with 340 days a year earlier and 151 days in the 1st quarter of 2007, RealtyTrac said.

According to RealtyTrac’s report,  219,258 American homes were involved in the foreclosure process in April, either having received a notice of default, been scheduled for auction or been repossessed.  This is nine percent less than from March and a 34 percent cut from April 2010.  The report also shows one in every 593 American homes received a foreclosure filing during April 2011.  In New York, it took a property 900 days to go through the process.  In Florida, it was 619 days and in California, 330 days.

Nevada tops the list of states for foreclosures in proportion to its population, with one out of every 97 homes receiving a foreclosure filing in April.  Arizona ranked second.  Although Arizona foreclosures fell 15 percent,  REOs (bank repossessions) rose 22 percent, keeping the state in second place for the fifth consecutive month.  One in every 205 homes received a foreclosure filing.  Similarly, a 22 percent jump in REOs kept California in third place for a sixth month despite a decline in activity, with one in every 240 units affected during the month.  Other states in the top five are Utah (one of every 322) and Idaho (one of every 325).

Just ten states account for 70 percent of all foreclosure activity.  The first two in terms of numbers of foreclosures, California with 55,869 filings and Florida with 19,649 and the fourth, Michigan with 12,996, have large populations.  Arizona and Nevada, with relatively small populations rank in the top five by virtue of numbers as well as foreclosure rate with 13,419 filings and 11,761 filings.  The next five states with the greatest number of foreclosures are Illinois, Texas, Georgia, Ohio, and Colorado.

Writing in The Atlantic, Daniel Indiviglio notes that “It’s hard to see how this is good news for the housing market.  Prices are likely falling more slowly since the foreclosures aren’t hitting the market as quickly as they should be.  But they cannot be held up artificially — the decline will just happen over a longer period of time instead of quickly and steeply.  That means it will take longer for the housing market to hit its true bottom.  Only when that occurs can a recovery begin.  In other words, banks’ failure to process foreclosures in a timely manner will prolong the housing market’s struggles.”