The share of home purchase transactions involving distressed properties surged to almost half in February, according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions.
Last month distressed properties – those involving homes acquired as part of a foreclosure or pre-foreclosure sale – accounted for 48.1 percent of the home purchase transactions tracked by the survey.
The February numbers were up significantly from the 37.3 percent level recorded as recently as November. It was also the highest distressed property market share seen since last July.
Stepped up government efforts, including temporary foreclosure moratoriums and a push to qualify more financially troubled homeowners for mortgage modifications, temporarily reduced the number of distressed properties coming on the housing market in the fall and much of this past winter. But now a growing number of distressed properties appear to be hitting the housing market.
There are three major types of distressed properties: damaged REO, move-in ready REO, and short sales. During the period from November to February, sales in all three categories rose, according to Campbell Surveys. Damaged REO grew from 12.3 percent to 14.4 percent; move-in ready REO grew from 12.6 percent to 16.6 percent, and short sales grew from 12.4 percent to 17.1 percent.
“Short sales now account for the No. 1 category of distressed property,” commented Thomas Popik, research director for Campbell Surveys. “Losses on short sales are typically lower than for REO, and both lenders and the government are pushing programs to facilitate short sales. But as more and more people default or simply want to walk away from their properties, mortgage servicers are having trouble expeditiously processing these complicated transactions.”
Meanwhile, in a hopeful sign for the housing market, first-time homebuyers are once again playing a growing role. The latest survey showed that the share of first-time homebuyers grew from 38.9 percent in January to 42.9 percent in February. Much of this growth is attributable to the federal tax credit due to expire this spring.
As more distressed properties have come onto the market, Campbell Surveys reports that home prices are again showing signs of weakness. Average home prices for all four categories of properties – damaged REO, move-in ready REO, short sales, and non-distressed – declined from January to February in the latest survey.
The Campbell/Inside Mortgage Finance Survey of Real Estate Market Conditions polls more than 1,500 real estate agents nationwide each month to analyae trends in home sales and mortgage usage patterns.
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