Solomon Group Real Estate Blog

RISMEDIA, June 30, 2010—RealtyTrac, one of the leading online marketplaces for foreclosure properties released its first U.S. Foreclosure Sales Report, which shows that foreclosure homes accounted for 31% of all residential sales in the first quarter of 2010, and that the average sales price of properties that sold while in some stage of foreclosure was nearly 27% below the average sales price of properties not in the foreclosure process.

A total of 232,959 U.S. properties in some stage of foreclosure—default, scheduled for auction or bank-owned (REO)—sold to third parties in the first quarter, a decrease of 14% from the previous quarter and down 33% from the peak during the first quarter of 2009, when sales of foreclosure homes accounted for 37% of all residential sales.

“First-time home buyers and investors continue to buy foreclosure properties in large numbers, and at substantial discounts,” said James J. Saccacio, chief executive officer of RealtyTrac. “As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration.”

The average sales prices on properties in some stage of foreclosure decreased 23% from 2006 to 2009 while the average discounts on foreclosure purchases steadily increased from 21% in 2006 to 27% in the first quarter of 2010. Discounts on REOs are larger than discounts on pre-foreclosures, although discounts on pre-foreclosures appear to be trending higher as short sales become more common.

Foreclosure sales increase 2,500 percent from 2005 to 2009
More than 1.2 million U.S. properties in some stage of foreclosure sold to third parties in 2009, an increase of 25% from 2008 and an increase of nearly 327% from 2007. Total foreclosure sales in 2009 were up more than 1,100% from 2006 and up more than 2,500% from 2005. Foreclosure sales accounted for 29% of all sales in 2009, up from 23% in 2008 and up from 6% in 2007.

The average sales price of properties that sold while in some stage of foreclosure in 2009 was 25% below the average sales price of properties not in the foreclosure process. That was up from an average discount of 22% in 2008 but down from an average discount of 26% in 2007. The average foreclosure discount in 2005 was 35%, driven by a nearly 50% discount on REOs; however, the discount on pre-foreclosures trended up slightly over the same five-year period, from nearly 12% in 2005 to 15% in 2008 and 2009.

Foreclosure sales by type in first quarter
A total of 144,503 bank-owned (REO) properties sold to third parties in the first quarter, down 13% from the previous quarter and down 27% from the first quarter of 2009. REO sales accounted for 19% of all sales in the first quarter, up from nearly 16% in the previous quarter but down from 21% of all sales in the first quarter of 2009. REOs sold for an average discount of 34%, up from an average discount of nearly 32% in both the previous quarter and the first quarter of 2009.

A total of 88,456 pre-foreclosure properties—in default or scheduled for auction—sold to third parties in the first quarter, down 15% from the previous quarter and down nearly 41% from the first quarter of 2009. Pre-foreclosure sales accounted for nearly 12% of all sales, up from nearly 10% in the previous quarter but down from 16% in the first quarter of 2009. Pre-foreclosures, which are often short sales, sold for an average discount of nearly 15%, up from nearly 14% in the previous quarter but down from 16% in the first quarter of 2009.

Nevada, California, Arizona post highest percentage of foreclosure sales in Q1
Foreclosure sales accounted for 64% of all sales in Nevada in the first quarter, the highest percentage of any state, although Nevada’s percentage was down from 65% of all sales in the previous quarter and 75% of all sales in the first quarter of 2009.

California posted the second highest percentage, with foreclosure sales accounting for 51% of all sales there in the first quarter—up slightly from 50% in the previous quarter but down from 70% of all sales in the first quarter of 2009.

Foreclosure sales as a percentage of all sales were also down in Arizona from the first quarter of 2009, but the state still posted the third highest percentage in the first quarter, with foreclosure sales accounting for 50% of all sales.

Other states where foreclosure sales accounted for at least one-third of all sales were Massachusetts, Rhode Island, Florida, Michigan, Georgia, Illinois, Idaho and Oregon.

Ohio, Kentucky, Illinois post highest foreclosure discounts
The average sales price of properties that sold while in some stage of foreclosure in the first quarter was 39% below the average sales price of properties not in the foreclosure process in Ohio, Kentucky and Illinois—the states with the three highest average foreclosure discounts.The average overall foreclosure discount was at least 35% in California, Tennessee, Pennsylvania, DC and New Jersey.

The biggest discount on bank-owned properties was in New York, where the average sales price for REOs was 52% below the average sales price for properties not in foreclosure. The biggest discount on pre-foreclosure properties was in Rhode Island, where the average sales price for properties in default or scheduled for auction was 33% below the average sales price for properties not in foreclosure.