RealtyTrac: Foreclosure Homes Account for 31 Percent of All U.S. Sales in Q2 2011

RealtyTrac reports: Foreclosure Homes Account for 31 Percent of All U.S. Sales in Q2 2011

The U.S. Foreclosure Sales Report™ showed that sales of homes that were in some stage of foreclosure or bank owned accounted for 31 percent of all U.S. residential sales in the second quarter of 2011, down from nearly 36 percent of all sales in the first quarter but up from 24 percent of all sales in the second quarter of 2010.

“With average prices on distressed real estate trending down and average discounts trending up, this report is clearly good news for well-positioned buyers and investors looking for bargain real estate that will build them wealth in the long term and often cash flow as rental real estate in the short term,” said James Saccacio chief executive officer of RealtyTrac. “Maybe less evident, however, is the good news in this report for distressed homeowners looking to sell, and even lenders saddled with large portfolios of delinquent loans.”

Saccacio said that financial institutions are starting to see short sales as a quicker and cheaper way of getting bad loans off their books.

“What we’re seeing in our new foreclosure sales report is the continued willingness of lenders to offer higher discounts on pre-foreclosures (short sales) as to avoid the high cost of going to REO,” added Saccacio. “This is a market driven solution as opposed to a government solution.”

Another trend that is emerging in the foreclosure landscape is that the time to sell a pre-foreclosure is getting shorter.

“The jump in pre-foreclosure sales volume coupled with bigger discounts on pre-foreclosures and a shorter average time to sell pre-foreclosures all point to a housing market that is starting to focus on more efficiently clearing distressed inventory through more streamlined short sales — at least in some areas,” Saccacio continued. “This gives distressed homeowners who do not qualify for loan modification or refinancing — or who are not interested in those options and want to sell — a better chance of completing a short sale to avoid foreclosure. Streamlined short sales also give lenders the opportunity to more pre-emptively purge non-performing loans from their portfolios and avoid the long, costly and increasingly messy process of foreclosure and the subsequent sale of an REO — which may end up selling for a lower price than it would have as a pre-foreclosure short sale and in the meantime further stresses already overloaded REO departments.”

Despite the increase in share of total sales from a year ago, sales of real estate in some stage of foreclosure (NOD, LIS, NTS, NFS) or bank-owned (REO) decreased from a year ago in terms of raw numbers. Third parties purchased a total of 265,087 homes in foreclosure or bank owned nationwide in the second quarter, up 6 percent from a revised first quarter total but still down 11 percent from the second quarter of 2010.

The following graph shows the average discount of short sales vs. REO sales in six markets.

This graph shows the average days it takes to sell a short sale vs. an REO sale.