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Distressed Sales Comprise Smaller Piece of Home Sales Pie

NationalMortgageProfessional.com
Jun 25, 2014

RealtyTrac has released its May 2014 Residential & Foreclosure Sales Report, which shows that U.S. residential properties, including single family homes, condominiums and townhomes, sold at an estimated annual pace of 5,147,550 in May, virtually unchanged from April and an increase of less than one percent from May 2013. The median sales price of U.S. residential properties — including both distressed and non-distressed sales — was $180,000, up six percent from the previous month and up 13 percent from a year ago. The year-over-year increase in May was the second consecutive month with a double-digit annual increase in U.S. home prices, and the biggest annual increase since U.S. home prices bottomed out in March 2012. The median price of distressed sales — properties in the foreclosure process or bank-owned — was $120,000, 37 percent below the median price of non-distressed properties: $190,000. Distressed sales and short sales combined accounted for 14.3 percent of all U.S. residential sales in May, down from 15.6 percent of sales in April and down from 15.9 percent of all sales in May 2013. “Distressed sales continue to represent a smaller share of the overall sales pie nationwide, helping to boost median home prices higher given that distressed sales tend to be in lower price ranges,” said Daren Blomquist, vice president at RealtyTrac. “When broken down by average price range, U.S. sales are clearly shifting away from the lower end. Properties selling below $200,000 represented 50 percent of all sales in May, but that was down from a 55 percent share a year ago. Meanwhile, the share of homes selling above $200,000 increased from a 45 percent a year ago to a 50 percent in May 2014.” Home sales in higher price ranges represent growing share of market Sales prices in every price range above $200,000 analyzed in the report increased as a share of total sales, both from the previous month and from a year ago, with the increase generally higher in the higher price ranges. The share of home sales in the $200,000 to $300,000 price range increased two percent from the previous month and were up six percent from a year ago, but the share of home sales in all price ranges above $750,000 was up more than 20 percent from a year ago. Meanwhile the share of home sales decreased from a year ago in all price ranges below $200,000, with bigger decreases corresponding to lower price ranges. The share of homes priced between $100,000 and $200,000 decreased five percent from a year ago, while the share of homes between $50,000 and $100,000 decreased 13 percent and the share of homes priced below $50,000 — often highly distressed homes — decreased 22 percent. Home sales in the $100,000 to $200,000 price range accounted for one-third of all home sales in May — the largest percentage of any price range — but homes priced between $200,000 and $400,000 were close, accounting for nearly 32 percent of all sales for the month. Sales of homes priced in the $200,000 to $400,000 range were at their highest percentage of U.S. home sales since September 2008 — a 68-month high. Sales volume decreases annually in 23 states, 31 of 50 largest metro areas The one percent increase in U.S. annualized sales in May from a year ago was the smallest increase in any month so far this year, and the 0.19 increase from the previous month marked the eighth consecutive month with flat or declining home sales on a month-over-month basis. Annualized sales volume in May decreased from a year ago in 23 states and the District of Columbia, along 31 of the nation’s 50 largest metropolitan statistical areas. States with decreasing sales volume from a year ago included California (down 15 percent), Arizona (down 10 percent), Nevada (down seven percent), Michigan (down three percent), and Florida (down three percent). Major metro areas with decreasing sales volume from a year ago included Boston (down 23 percent), Fresno, Calif., (down 22 percent), Orlando (down 18 percent), Los Angeles (down 16 percent), and Phoenix (down 13 percent). “Sales continue to be down year over year, but inventory levels are beginning to climb giving prospective homeowners more choices to buy within the Southern California market,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. Highest share of distressed sales in Las Vegas, Lakeland and Modesto Short sales and distressed sales — in foreclosure or bank-owned — accounted for 14.3 percent of all sales in May, down from 15.6 percent in April and down from 15.9 percent of all sales in May 2013. Metro areas with the highest share of combined short sales and distressed sales were Las Vegas (36.6 percent), Lakeland, Fla., (33.3 percent), Modesto, Calif., (31.9 percent), Jacksonville, Fla., (31.7 percent), and Riverside-San Bernardino-Ontario in Southern California (29.3 percent). Short sales nationwide accounted for 4.5 percent of all sales in May, down from 5.4 percent in April and down from 5.8 percent in May 2013. Metros with the five highest percentages of short sales in May were all in Florida: Lakeland (17.7 percent), Orlando (14.9 percent), Tampa-St. Petersburg-Clearwater (13.4 percent), Palm Bay-Melbourne-Titusville (12.9 percent), and Sarasota (11.6 percent). Sales of bank-owned (REO) properties nationwide accounted for 8.6 percent of all sales in May, down from 9.1 percent of all sales in April and down from 9.3 percent of all sales in May 2013. Metros with the highest percentage of REO sales in May were Modesto, Calif., (26.7 percent), Riverside-San Bernardino-Ontario (23.3 percent), Las Vegas (23.1 percent), Stockton, Calif., (21.5 percent), and Bakersfield, Calif. (19.7 percent). Sales at the public foreclosure auction accounted for 1.2 percent of all sales nationwide in May, up from 1.1 percent of all sales in April and up from 0.8 percent of all sales in May 2013. Metros with the highest percentage of foreclosure auction sales in May Orlando (3.8 percent), Tampa-St. Petersburg-Clearwater (3.8 percent), Miami (3.7 percent), Indianapolis (3.5 percent), and Lakeland, Fla., (3.4 percent). Biggest distressed discounts on scheduled auctions, vacant with negative equity As a supplement to the May U.S. Residential & Foreclosure Sales Report, RealtyTrac analyzed residential property sales transactions in the 12 months ending in March 2014 to pinpoint which types of distressed properties are selling at the biggest discounts based on foreclosure status, occupancy status, equity and year built range. The analysis looked at 24 different distressed property profiles based on these four factors, comparing the sales price to the estimated full market value for each sale. The final discount was calculated by comparing the average discount (below market value) or premium (above market value) for each property profile to the control of properties not in foreclosure that sold during the same time period. Based on this analysis, distressed properties with the biggest discount were those scheduled for public foreclosure auction that were vacant, had negative equity and were built between 1950 and 1990. Properties in this category sold for an average discount that was 28 percent below the control group of non-distressed sales. Other distressed property profiles with discounts among the top five nationwide were the following: ►Properties in default with positive equity (26 percent discount) ►Properties in default with negative equity, vacant and built in 1950 or before (26 percent discount) ►Properties scheduled for foreclosure auction with negative equity and vacant (25 percent discount) ►Properties scheduled for foreclosure auction and vacant (25 percent). Distressed properties selling at a premium The analysis found that not all distressed properties sold at a big discount, and in some cases even sold at a premium above non-distressed properties. Bank-owned properties overall sold at a 3 percent premium, while bank-owned properties built in 1950 or before sold at a 7 percent premium. Some sub-categories of bank-owned homes sold at a discount. Bank-owned properties that were confirmed vacant — without the former homeowner or tenant still living there — sold at an 18 percent discount below the non-distressed control, and bank-owned properties that sold after 1990 and between 1950 and 1990 also sold at slight discounts. Properties with negative equity that were not in foreclosure or bank owned sold at a substantial premium of 19 percent above the control of all properties with no foreclosure status. Best distressed discounts vary by state The analysis also found the property profiles with the biggest discounts — and the discounts available — varied significantly by state. Below are the distressed property profiles with the biggest available discounts for select states. ►California: scheduled for foreclosure auction with positive equity (17 percent discount) ►Florida: scheduled for foreclosure auction with negative equity, vacant and built between 1950 and 1990 (29 percent discount) ►Ohio: in default, negative equity, vacant and built between 1950 and 1990 (34 percent discount) ►Michigan: in default and vacant (34 percent discount) ►New York: scheduled for foreclosure auction with negative equity and vacant (38 percent discount)
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