Foreclosures Comprise 25% of Sold Homes

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NEW YORK (MainStreet) – Foreclosure sales accounted for 25% of the housing market in the third quarter, according to the latest foreclosure data from RealtyTrac.

A total of 188,748 U.S. properties in a stage of foreclosure — default, scheduled for auction or bank-owned (REO) — sold to third parties in the third quarter, a decrease of 25% from the previous quarter, and a decrease of nearly 31% from the third quarter of 2009.

The decrease in sales occurred despite the fact that homebuyers were able to get the highest average foreclosure discount RealtyTrac has seen since the fourth quarter of 2005. The average sales price of properties that sold while in some stage of foreclosure was more than 32% below the average sales price of properties not in the foreclosure process, up from a 26% discount in the previous quarter, and a 29% discount in the third quarter of 2009.

According to RealtyTrac, the decrease in foreclosure sales relates to a dip in the housing market in general. The volume of non-foreclosure properties decreased 29% from the second quarter, and nearly 31% year over year.

“The discount is largely a result of the homebuyer’s tax credit expiring in the second quarter, which lead to a lack of demand in the third quarter,” Daren Blomquist, marketing communications manager at RealtyTrac, said. He explained the dip in demand is what allowed the homebuyers who remained in the market to get such a significant discount on distressed properties.

According to Blomquist, while the numbers decreased from last quarter and year over year, the percentage of the market comprised of foreclosed properties has remained consistently around 24% to 25% all year.

“We’re expecting that may go down in the fourth quarter as buyers remain skittish about purchasing a property that has been processed properly,” said Blomquist, explaining that the foreclosure-processing scandal, which was brought to light at the very end of the third quarter, had little effect on this round of data.

A report from RealtyTrac earlier this month found that foreclosure activity decreased by 4% in October, thanks to a dramatic decrease in the amount of bank repossessions, the foreclosure stage most affected by the robo-signing scandal.

RealtyTrac compiles its data from its online database of foreclosure properties, which includes more than 1.5 million default, auction and bank-owned listings from more than 2,200 counties.

In the third quarter, bank repossession sales accounted for 15% of the foreclosure market, the same as the previous quarter, and slightly below the 16% of all sales reported in the third quarter of 2009. REOs sold for an average discount of nearly 41%, up from an average discount of 34% last quarter and nearly 35% in the third quarter of 2009.

State by state, Nevada had the highest percentage of foreclosure sales with distressed properties accounting for nearly 54% of all sales in the third quarter. Arizona had foreclosure sales account for nearly 47% of all sales, while in California, foreclosed properties accounted for nearly 40%. Other states where foreclosure sales accounted for at least one-quarter of all sales were Florida (37%), Massachusetts (35%), Michigan (32%), Georgia (29%), Oregon (27%), Idaho (25%) and Illinois (25%).

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