Homes in the foreclosure process sold at an average 26 percent discount in the second quarter as almost one-fourth of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.
A total of 248,534 homes that sold in the period had received a default or auction notice or been seized by banks, RealtyTrac said in a report today. The number was up 5 percent from the first quarter and down 20 percent from a year earlier, according to the Irvine, California-based data seller.
“We’re still clearly building up more distressed inventory,” Rick Sharga, RealtyTrac’s senior vice president, said in a telephone interview. “That will either put downward pressure on prices or keep them from going up.”
The discount reflects the average sales price of homes in the foreclosure process compared with properties not in distress, according to RealtyTrac. About 24 percent of all homes sold were in some stage of foreclosure, down from 31 percent in the first quarter. The average price of a distressed property was $174,198, up from $171,971, the company said.
Foreclosures are adding to a swelling U.S. housing supply as an unemployment rate of 9.6 percent and the end of a federal homebuyer tax credit dampen purchases. Home seizures in August reached a record for the third time in five months, with more than 95,000 repossessions, RealtyTrac said earlier this month. Home prices dropped in July, the eighth consecutive year-over-year decline, the Federal Housing Finance Agency said Sept. 22.
Distressed sales dropped as a portion of total transactions because the homebuyer tax credit of as much as $8,000 spurred an “extraordinary sales spike,” Sharga said. The benefit expired April 30.
Sales of homes with mortgage distress probably will account for a quarter to a third of all transactions through 2011, up from 1 to 3 percent before the housing crisis, Sharga said.
“Many people elected to use the $8,000 credit as their discount, rather than buy a house that needed $8,000 worth of work,” Sharga said.
Bank-owned properties sold for an average discount of almost 35 percent in the second quarter, little changed from both the previous quarter and a year earlier. Such properties accounted for 15 percent of all U.S. home sales, down from almost 19 percent in the first quarter and 20 percent a year earlier, RealtyTrac data show.
Properties in default or scheduled for auction sold for an average discount of almost 13 percent, down from 16 percent in the previous quarter and 19 percent a year earlier. These homes are often sold in short sales, where lenders accept less than the outstanding loan amount for the property, RealtyTrac said. Sales of properties either in default or headed for auction accounted for 9 percent of all transactions.
The average price was $154,147 for bank-owned properties and $204,932 for homes in default or scheduled for auction, RealtyTrac said.
Nevada had the highest proportion of distressed sales of any U.S. state in the second quarter, with 56 percent of all transactions involving properties seized by banks or at risk of foreclosure. Arizona ranked second at 47 percent, while California was third at 43 percent.
Distressed sales accounted for at least a quarter of total sales in Rhode Island, Massachusetts, Florida, Michigan, Georgia, Idaho and Oregon, RealtyTrac said.
Ohio had the highest average price discount for foreclosed homes at almost 43 percent. Kentucky followed at 41 percent and California was third at 39 percent.
Michigan, Tennessee, Pennsylvania, Georgia, Illinois, Iowa and the District of Columbia all had average distress discounts of at least 35 percent, RealtyTrac said. The company sells default data from more than 2,200 counties representing 90 percent of the U.S. population.