The discount for repo homes became wider in 2011
While homebuyers can anticipate to find an abundance of those bargains during 2011, do to less repo homes being sold during 2010 than were foreclosed on by lenders.
Buyers who bought a bank repo during 2011 received, a discount of 28 percent on average, compared to a normal purchase. That average is up over a 27 percent markdown during 2009, While this represents only a slight boost, this trend suggests a broadening price gap between repo sales and other forms of residential property sales. Repo homes consisted of almost 26 percent of every residential sale in 2010 year, RealtyTrac reports. That's behind from 29 percent during 2009 although up from the 23 percent during 2008.
In a normal market, foreclosed homes amount to under 10 percent of every residential home sale. A total of, 831,574 foreclosed homes were sold in 2010, including those that were in some sort of foreclosure process but not yet repo'd by a lender. Which is down 31 percent over 2009 and down almost 14 percent over 2008. Home sales not within the foreclosure mess were down almost 19 percentage points in 2010 over the previous year. Although the furious pace of foreclosed home sales slowed, banks stepped up the home repossession process, foreclosing on over 1 million properties last year. This increased the often-labeled shadow supply of repo homes that have not come on the market yet. Many experts argue that there will not be a
housing market recovery until lenders obtain buyers for their REO properties. This inventory needs to be cleared out if the housing market is ever going to become normal.
Lenders are reluctant to add too many REO properties to the market at one time, as they could face writing down sizeable losses on those sales. Normally, approximately 30 percent of the banks' REO inventory is actively for sale. Adding more repo properties, although, would almost certainly lower overall home values in a large number of marketplaces, as foreclosed homes are often sold at a steep discount as compared with other properties. As it is, housing professionals predict the price of homes will drop another 5 percent during 2011 which could create a scenario that could push housing prices even lower.
Bank repo sales, like overall home sales, dropped sharply during the last quarter of 2010. Tax credits from the government earlier in 2010 assisted in
revving up sales of homes, but drew transactions forward that would have normally happened later during the year. The bank' efforts to handle foreclosure documentation issues and increased scrutiny in states allowing the courts to become involved in the foreclosure procedures also rained on bank-owned home sales. That delay began to improve during December, although foreclosure transactions spiked 21 percent.
Arizona featured the greatest percentage of repo sales during 2010. Nevada was the national leader with foreclosure sales amounting to almost 57 percent of their home sales. And that was off from 67 percent from the previous year. A number of other states also had sales of foreclosures that amounted at least a fourth of all their sales of homes last year. The list includes: Michigan, Florida, Georgia, Oregon, Idaho, Illinois, Colorado and Virginia.
Feb 28, 2011