The proportion of foreclosure and other distressed property sales found in the
housing market continued to climb in September, according to the latest
Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market
Conditions. The new data suggests that any significant delay in foreclosures resulting
from the recent legal controversy could have major repercussions for the housing
market in the coming months.
The September results pointed to two disturbing but related trends. One, a
growing share of home sale transactions involve distressed properties – namely real
estate owned (REO) or homes acquired through a foreclosure, and short sales. Two,
first-time homebuyers, who have been the most active purchasers of distressed
properties, are reducing their activity.
Distressed properties as a share of total home purchase transactions hit 47.5% in
September, the latest survey found. That was up from 45.7% in August and up from
44.8% in September of 2009. Importantly, damaged REO saw one of the sharpest
rises as a share of all transactions – going from 13.6% in August to 14.7% in
September.
While the inventory of distressed properties in the housing market is expected to
grow because of the recent foreclosure stoppages related to potential legal problems,
the share of distressed property sales will probably drop due to the delays. “Banks
have halted sales on many foreclosed homes, but not all. Three of my potential
closings were halted until further notice,” reported one real estate agent responding
to the September survey. “Bank freeze on closings will cause a lot of problems as
80% of [my] sales are REO sales,” added another agent responding to the survey.
The decline in first-time homebuyers is not surprising given the end of the federal tax
credit in late spring. Since early summer, the Campbell/Inside Mortgage Finance Survey
has seen the percentage of first-time homebuyers drop from 42.4% in June to just 34.4% in
September.
“For much of 2009 and early 2010, the proportion of first-time buyers followed the
proportion of distressed properties,” commented Thomas Popik, research director for
Campbell Surveys. “Current homeowners sell a home when they buy a home, resulting in
no net take-up. Likewise, many investors buy, rehab, and sell, providing no take-up. In
contrast, first-time homebuyers absorb excess housing stock. However, in recent months,
they have been able to play this role less frequently because of restricted financing.”
September survey results show that first-time homebuyers are the No. 1 category of
purchaser for move-in ready REO and short sales. In contrast, investors are the most
important buyers of damaged REO. Current homeowners concentrate their purchases on
non-distressed properties, which typically have the most predictable closing dates.
Because first-time homebuyers disproportionately buy distressed properties, their exit
from the market is likely to affect both demand and prices for these types of properties.
“Mortgage servicers would be well-advised to expedite processing for move-in REO and
short sale properties, while prices are still favorable for the investors in their defaulted
mortgages,” Popik stated.
USING TRENDS UPDATEFirst-Time Homebuyers and Distressed Properties
The decline in first-time homebuyers is not surprising given the end of the federal tax
credit in late spring. Since early summer, the Campbell/Inside Mortgage Finance Survey
has seen the percentage of first-time homebuyers drop from 42.4% in June to just 34.4% in
September.
“For much of 2009 and early 2010, the proportion of first-time buyers followed the
proportion of distressed properties,” commented Thomas Popik, research director for
Campbell Surveys. “Current homeowners sell a home when they buy a home, resulting in
no net take-up. Likewise, many investors buy, rehab, and sell, providing no take-up. In
contrast, first-time homebuyers absorb excess housing stock. However, in recent months,
they have been able to play this role less frequently because of restricted financing.”
September survey results show that first-time homebuyers are the No. 1 category of
purchaser for move-in ready REO and short sales. In contrast, investors are the most
important buyers of damaged REO. Current homeowners concentrate their purchases on
non-distressed properties, which typically have the most predictable closing dates.
Because first-time homebuyers disproportionately buy distressed properties, their exit
from the market is likely to affect both demand and prices for these types of properties.
“Mortgage servicers would be well-advised to expedite processing for move-in REO and
short sale properties, while prices are still favorable for the investors in their defaulted
mortgages,” Popik stated.
USING TRENDS UPDATEFirst-Time Homebuyers and Distressed Properties
USING TRENDS UPDATEFirst-Time Homebuyers and Distressed Properties
The decline in first-time homebuyers is not surprising given the end of the federal tax
credit in late spring. Since early summer, the Campbell/Inside Mortgage Finance Survey
has seen the percentage of first-time homebuyers drop from 42.4% in June to just 34.4% in
September.
“For much of 2009 and early 2010, the proportion of first-time buyers followed the
proportion of distressed properties,” commented Thomas Popik, research director for
Campbell Surveys. “Current homeowners sell a home when they buy a home, resulting in
no net take-up. Likewise, many investors buy, rehab, and sell, providing no take-up. In
contrast, first-time homebuyers absorb excess housing stock. However, in recent months,
they have been able to play this role less frequently because of restricted financing.”
September survey results show that first-time homebuyers are the No. 1 category of
purchaser for move-in ready REO and short sales. In contrast, investors are the most
important buyers of damaged REO. Current homeowners concentrate their purchases on
non-distressed properties, which typically have the most predictable closing dates.
Because first-time homebuyers disproportionately buy distressed properties, their exit
from the market is likely to affect both demand and prices for these types of properties.
“Mortgage servicers would be well-advised to expedite processing for move-in REO and
short sale properties, while prices are still favorable for the investors in their defaulted
mortgages,” Popik stated.