Rising home values and an improved economy changed the foreclosure picture dramatically over the last two years. The decline in foreclosures and distressed sales resulted in less downward pressure on prices and more buyer confidence. To find out how your market performed, see the 4th quarter 2013 Local Market Reports.
Here are a few highlights from the reports:
- All 48 of the states in this sample experienced a decline in their foreclosure rates between the 3rd quarter of 2012 and 2013.
- The states with the largest declines were concentrated in areas hardest hit by the market decline, including Arizona and California.
- More than a third of markets bettered the U.S. average of a 25.7% drop in the foreclosure rate between the 3rd quarter of 2012 and the 3rd quarter of 2013.
Homeowners who had experienced a foreclosure or short sale are starting to return as homeowners, although access to financing is posing a constraint, according to information in the August REALTORS® Confidence Index Survey report.
- About 23 percent of respondents reported working with a buyer who previously experienced a foreclosure or short sale since 2005.
- About 46 percent of responding REALTORS® reported that these buyers they worked with could not obtain mortgage financing.
- In reference to these buyers who did not obtain mortgage financing, 65 percent of respondents reported that the reason was related to the previous foreclosure or short sale.
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.
Foreclosed property in January was reported as selling at a 20 percent discount, while short sale properties sold at a 12 percent average discount according to the January REALTORS® Confidence Index.
- Approximately 24 percent of sales were distressed (foreclosures, short sales), compared to approximately 40 percent in March 2011.
- Property condition has a major impact on sales, with below average foreclosures reported as selling at a 24 percent discount to market, compared to properties in above average condition going for 13 percent below market.
The discount to market is affected by the property’s physical condition. The unweighted average price discount for the period January-December 2012 is about 15 percent for houses in above average condition and about 35 percent for those in the poorest condition.
What this means for REALTORS®: Keep emphasizing the value of good home maintenance to build up home equity and maximize price.