Recent Foreclosure Delays Come on Heels of Rise in Distressed Properties, Latest Campbell/Inside Mortgage Finance Survey Reveals
WASHINGTON, D.C. (October 25) – The proportion of foreclosure and other distressed property sales found in the housing market continued to climb in September, according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The new data suggests that any significant delay in foreclosures resulting from the recent legal controversy could have major repercussions for the housing market in the coming months.
The September results pointed to two disturbing but related trends. One, a growing share of home sale transactions involve distressed properties – namely real estate owned (REO) or homes acquired through a foreclosure, and short sales. Two, first-time homebuyers, who have been the most active purchasers of distressed properties, are reducing their activity.
Distressed properties as a share of total home purchase transactions hit 47.5% in September, the latest survey found. That was up from 45.7% in August and up from 44.8% in September of 2009. Importantly, damaged REO saw one of the sharpest rises as a share of all transactions – going from 13.6% in August to 14.7% in September.
While the inventory of distressed properties in the housing market is expected to grow as a result of the recent foreclosure stoppages related to potential legal problems, the share of distressed property sales will probably drop as a result of the delays. “Banks have halted sales on many foreclosed homes, but not all. Three of my potential closings were halted until further notice,” reported one real estate agent responding to the September survey. “Bank freeze on closings will cause a lot of problems as 80% of [my} sales are REO sales,” added another agent responding to the survey.
The decline in first-time homebuyers is not surprising given the end of the federal tax credit in late spring. Since early summer, the Campbell/Inside Mortgage Finance Survey has seen the percentage of first-time homebuyers drop from 42.4% in June to just 34.4% in September.
“For much of 2009 and early 2010, the proportion of first-time buyers followed the proportion of distressed properties,” commented Thomas Popik, research director for Campbell Surveys. “Current homeowners sell a home when they buy a home, resulting in no net take-up. Likewise, many investors buy, rehab, and sell, providing no take-up. In contrast, first-time homebuyers absorb excess housing stock. However, in recent months, they have been able to play this role less frequently because of restricted financing.”
The Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions surveys more than 3,000 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.
For more information on the survey contact: John Campbell at Campbell Surveys, (202) 363-2069, firstname.lastname@example.org.