In line with the broad decline in foreclosure inventory, distressed sales continue to make up for a smaller share of overall residential sales. Approximately 12 percent of respondents who reported a sale in the August REALTORS® Confidence Index Survey sold a distressed property, substantially down from levels seen a few years ago.
For the past 12 months, properties in “above average” condition have been discounted by an average of 10-11 percent, while properties in “below average” condition were discounted at an average of 15-20 percent.
Approximately 18 percent of respondents who reported a sale in May sold a distressed property, substantially down from levels a few years ago, but unchanged from April. REALTORS® continued to report strong demand for REOs from investors. [Source: June REALTORS® Confidence Index Survey]
What Does this Mean for REALTORS®?
The major market problem now is lack of home inventory: problems with distresseed real estate have declined significantly. The reported”Shadow Inventory” and expected problems have not shown up in the market to any signficant degree—and the market could absorb a significant increase in inventory if it did show up. Right now the major market problem is the lack of home inventories for sale.
The share of distressed properties on the market continued to decline in April. Approximately 18 percent of REALTORS® who responded to the April REALTORS® Confidence Index Survey and who reported a sale sold a distressed property, substantially down from levels a few years ago.
REALTORS® continued to report strong demand for REOs from investors who reportedly win against first-time homebuyers. About 37 percent of reported sales made to investors were distressed properties, compared to about 17 percent in the case of first-time homebuyers.
Distressed property sold at a discount of between 12 to 35 percent of the market value depending on property conditions over the past year, based on information from the March REALTORS® Confidence Index Survey. Not surprisingly, the price discount is affected by the property condition: properties in the poorest condition are discounted at twice the rate of those with above average condition. Currently, about 21 percent of Existing Home Sales are distressed properties.
The share of distressed properties on the market continued to decline. About 21 percent of REALTORS® reporting on their last sale in March sold distressed properties, compared to approximately 40 percent in March 2011. This is based on data from the March REALTORS® Confidence Index Survey.
Distressed sales are mostly sold for cash. Distressed sales accounted for 35 percent of cash sales compared to 21 percent of mortgage sales.