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Rapidly Growing REO Inventory Going to Investors, Not Owner-Occupied Buyers

NationalMortgageProfessional.com
Dec 09, 2011

New Vista Asset Management, a San Diego-based provider of real estate services for banks and other sellers of foreclosed residential homes, has published the results of a three-year study examining buyer types in 18 U.S. counties hit hardest by America's mortgage crisis. The study uses data extracted from local recorder, courthouse and tax assessment records to determine whether the purchasers buying foreclosed houses from banks, the U.S. Department of Housing & Urban Development (HUD), the government-sponsored enterprises (Fannie Mae and Freddie Mac), are owner-occupants or absentee owners using single family homes as rental or vacation properties. New Vista's data indicates that the percentage of real estate-owned (REO) homes sold to owner occupant buyers has decreased in almost every market analyzed by the company in a study that began tracking real estate sale transactions closed in the first quarter of 2009 and includes consecutive quarterly data through the third quarter of 2011. "Although, quarter-by-quarter, we have observed some market-specific increases, over the entire period, owner occupancy rates for REO sales have broadly weakened," said Brian Hurley, New Vista's president and chief operating officer. "With eleven consecutive quarters of data, we can look beyond both seasonality and the temporary impact of demand stimuli such as the homebuyer tax credit, and observe a clear pattern of decline." In Los Angeles County, Calif., the New Vista data shows 79.36 percent of single-family REO houses were purchased by owner occupants in 2009, compared with only 60.32 percent in the third quarter of 2011. Most counties covered by the study saw declines of more than five percentage points during the same period, with a few dropping more modestly. "We are troubled by the significant drop in owner occupant purchases of REO properties in these hard hit markets, which is no doubt compounded by decreased access to credit and a failure to repair foreclosed properties to move-in condition," said Kevin Stein of California Reinvestment Coalition. "The increased investor acquisition of REOs is reversing the years of community development progress that nonprofits have facilitated throughout California. We need to ensure that lenders, nonprofits and government agencies are working together to give qualified homebuyers a fair chance to purchase REO properties and help stabilize residential neighborhoods." According to the New Vista study, only one county included in the Index (Wayne County, Mich.) had an owner occupancy rate for single-family REO sales below 50 percent in 2009. By the third quarter of 2011, owner occupancy rates for REO sales in an additional four of the studied counties had fallen below 50 percent, including Maricopa County, Ariz.; Osceola County, Fla.; Miami-Dade County, Fla.; and Clark County, Nev. "The decline in owner occupant sales in Maricopa County over the past two years has altered the fabric of our neighborhoods," said Patricia Garcia Duarte, president of Neighborhood Housing Services of Phoenix and chair of the Arizona Foreclosure Prevention Task Force. "We need to look carefully at this trend and refocus on giving homebuyers a chance to own a piece of the American Dream."  
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