Short Sales Soared While Foreclosures Fell

by 28 Feb 2013

RealtyTrac reported today 947,995 U.S. properties in some stage of foreclosure or bank-owned (REO) were sold during the year, a decrease of 6 percent from 2011 and down 11 percent from 2010.

These foreclosure-related sales accounted for 21 percent of all U.S. residential sales during the year, down from 23 percent of all sales in 2011 and down from 28 percent of all sales in 2010. Despite the decrease nationwide, REO sales in 2012 increased from the previous year in 26 states and still outnumbered pre-foreclosure sales in 38 states, including Georgia, Illinois, Indiana, Massachusetts, Michigan, Minnesota and Nevada.

In the fourth quarter of 2012, residential properties in foreclosure or bank-owned sold for an average price of $171,704, an increase of 2 percent from the third quarter and an increase of 4 percent from the fourth quarter of 2011.

Non-foreclosure short sales in 2012 sold short of the loan amount by an average of $81,621, down from an average of $87,809 short in 2011.  Non-foreclosure short sales accelerated toward the end of the year, with the fourth quarter total the highest quarterly total of the year and up 17 percent from the fourth quarter of 2011.

"Although foreclosure-related sales represent a shrinking share of total sales, primarily because of fewer bank-owned purchases, distressed sales are still a disproportionately high portion of the overall housing market," said Daren Blomquist, vice president of RealtyTrac. "And while distressed properties -- whether bank-owned, pre-foreclosure or short sales not in foreclosure -- are still selling at a significant discount compared to non-distressed properties, average distressed property prices are increasing in many markets thanks to strong demand and limited inventory."

Third parties purchased a total of 449,873 pre-foreclosure residential properties -- in default or scheduled for auction -- in 2012, up 6 percent from 2011 and just 1 percent below the 2010 total of 454,111 pre-foreclosure sales -- the highest annual total since RealtyTrac began tracking in 2005.

Pre-foreclosure sales in 2012 increased annually in 28 states and outnumbered REO sales in 12 states, including Arizona, California, Colorado, Florida, Maryland, New Jersey and New York. Pre-foreclosure sales hit record annual highs in nine states, including California, Georgia, Illinois, Ohio and Texas.

In the fourth quarter of 2012, pre-foreclosure properties sold for an average price of $190,031, up 2 percent from the previous quarter and up 2 percent from the fourth quarter of 2011. The average price of a pre-foreclosure residential property in the fourth quarter was 23 percent below the average price of a non-foreclosure residential property, down from a 26 percent discount in the third quarter but up from a 17 percent discount in the fourth quarter of 2011.

Pre-foreclosure homes that sold in the fourth quarter took an average of 336 days to sell after starting the foreclosure process, down from an average of 359 days in the previous quarter but still up from an average of 308 days in the fourth quarter of 2011.

Third parties purchased a total of 498,122 bank-owned (REO) residential properties in 2012, down 15 percent from 2011 and down 19 percent from 2010. REO sales accounted for 11 percent of all residential sales during the year, down from 13 percent in 2011 and 16 percent in 2010.

Despite the decrease nationwide, REO sales in 2012 increased from 2011 in 26 states, including Illinois (19 percent increase), Pennsylvania (12 percent increase), Massachusetts (12 percent increase), Texas (11 percent increase), and Wisconsin (10 percent increase).

In the fourth quarter of 2012, REO properties sold for an average price of $151,998, up 1 percent from the previous quarter and up 3 percent from the fourth quarter of 2011. The average price of an REO residential property in the fourth quarter was 39 percent below the average price of a non-foreclosure residential property, down from a 40 percent discount in the third quarter but up from a 34 percent discount in the fourth quarter of 2011.

REOs that sold in the fourth quarter took an average of 178 days to sell after being foreclosed, down from 186 days in the third quarter but up slightly from 175 days in the fourth quarter of 2011.

Short sales (where the sales price was below the estimated amount of all outstanding loans for a given property) of properties not in foreclosure accounted for an estimated 22 percent of all U.S. residential sales in 2012 and increased 4 percent from 2011.

Some of the states with the biggest increases in non-foreclosure short sales were Nevada (86 percent increase), Wisconsin (45 percent increase), Washington (28 percent increase), North Carolina (24 percent increase), and Illinois (18 percent increase).

Some of the states with the biggest share of non-foreclosure short sales in 2012 were Michigan (33 percent), Florida (33 percent), Nevada (33 percent), Maryland (28 percent), and Ohio (27 percent).

Non-foreclosure short sales nationwide accelerated throughout the year, increasing from the previous quarter in each quarter. Fourth quarter non-foreclosure short sales increased 2 percent from the third quarter and were up 17 percent from the fourth quarter of 2011, reaching a seven-quarter high.

Non-foreclosure short sales in 2012 were on average $81,621 "short" of the loan amount owed on the property being sold, down from an average of $87,809 short in 2011. Properties in the foreclosure process that sold as short sales in 2012 were $129,817 "short" of the loan amount.

California, Georgia, Nevada post highest percentage of foreclosure sales in 2012

Foreclosure sales accounted for more than 38 percent of all residential sales in California in 2012, the highest percentage of any state but down from 44 percent of all sales in 2011 and down from 49 percent of all sales in 2010. California pre-foreclosure sales in 2012 increased 12 percent from 2011 while California REO sales decreased 27 percent over the same time period.

Georgia foreclosure-related sales increased 12 percent in 2012 compared to 2011 and accounted for nearly 38 percent of all residential sales in the state during the year. Georgia pre-foreclosure sales in 2012 increased 16 percent from 2011 while Georgia REO sales increased 9 percent during the same time period.

Foreclosure-related sales accounted for nearly 38 percent of all residential sales in Nevada in 2012 despite a 36 percent decrease from 2011. Nevada pre-foreclosure sales in 2012 decreased 20 percent from 2011 while Nevada REO sales decreased 46 percent during the same time period. Foreclosure-related sales had accounted for 55 percent of all Nevada residential sales in 2011 and 60 percent of all Nevada residential sales in 2010.

Other states where foreclosure-related sales accounted for at least 20 percent of all residential sales in 2012 were Arizona (34 percent), Michigan (31 percent), Illinois (27 percent), Florida (25 percent), Colorado (23 percent), Wisconsin (22 percent), and New Hampshire (21 percent).

Foreclosure-related sales accounted for 46 percent of all residential sales in the Riverside-San Bernardino-Ontario metro area in Southern California in 2012, the highest percentage among the nation's 20 largest metropolitan statistical areas in terms of population.

Other metros where foreclosure-related sales accounted for at least 30 percent of all residential sales in 2012 were Atlanta (41 percent), Los Angeles (36 percent), Phoenix (34 percent), San Diego (34 percent), Detroit (32 percent), San Francisco (31 percent) and Chicago (31 percent).

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