You know the housing market is seriously topsy-turvy when Nevada’s percentage of foreclosure sales (56%) relative to the larger market represents an improvement in the latest RealtyTrac data.
“One year ago, it was 65%,” Daren Blomquist, RealtyTrac’s director of marketing communications, told BUILDER Thursday, after the Irvine, Calif.-based data firm released its 2010 second-quarter statistics for foreclosure sales. According to the firm, more than 248,000 distressed properties (in default, scheduled for auction, or real-estate-owned) were sold in April, May, and June of this year.
While those figures represent nearly a 5% increase in total numbers compared to the previous quarter, RealtyTrac executives said that non-distressed sales grew even more during that period. They attributed that growth to the federal housing tax credit, which required a signed contract by April 30, 2010. Overall, foreclosure sales were 24% of all residential sales in 2010’s second quarter.
That level of volume continues to exert downward pressure on pricing. According to RealtyTrac data, foreclosure sales sold for an average of 26% less than their counterparts that were not in foreclosures. Builders with any REOs in their communities better brace themselves for difficult appraisals: bank-owned properties went for an average of 35% less than non-foreclosure sales. Short sales, which are being actively encouraged by the Obama administration, posted an average discount of 13% compared to non-distressed transactions. (See chart.)
|Transaction Type||Average Price Discount in 2Q 2010|
But RealtyTrac’s Blomquist said that his company does not expect to see a much-dreaded (and much-discussed) double-dip in home values as a result of these pricing trends. “Foreclosures continue to have a dampening effect on home prices, but we don’t expect a double dip,” he said. “While REOs have been increasing, there is no evidence that there is going to be this tidal wave that will hit and crater home prices again. It’s more like a dripping faucet” that will keep home values from any significant appreciation.
Of course, in some states, that drippy faucet feels more like a constantly flooding basement. Nevada, which was mentioned earlier, has the highest percentage of foreclosure sales in the country, with 56% of all residential transactions involving a property in some state of foreclosure. Other foreclosure crisis zones are dealing with similar situations, with foreclosure sale rates of 47% for Arizona and 43% for California, which rank second and third after Nevada on that metric. (See chart.)
|State||Percentage of Foreclosure Sales in Q2 2010|
A few foreclosure hot spots appear to be drying out, though, from Virginia to selected California markets. Others simply seem to be staying relatively strong in a difficult environment. “Texas is a market that seems to have held up very well,” noted Blomquist. Just 12% of Texas residential sales qualified as foreclosure sales in the second quarter, which is half the national average of 24%.
Alison Rice is senior editor, online, at BUILDER magazine.
Learn more about markets featured in this article: Providence, RI.