The new year has witnessed a resurgence of sorts in the housing market – at least in some areas that have had price increases and decreases in foreclosure rates. But overall, 2012 is beginning to look more like a return of the foreclosure market of 2010 –with a vengeance.
The latest numbers for the last three months of 2011 released indicate that transactions involving distressed properties – including foreclosures, short sales, and bank-owned REOs – now make up 24% of all home transactions in the U.S., up noticeably from 20% in the third quarter of 2011. Since this number is from the fourth quarter of 2011, the exact percentage could be higher today.
Much of the increase is due to an increase of short sale approvals by lenders who are eager to unload underperforming mortgages from their ledgers, in the hope that by cutting their losses they will avoid the unenviable task of managing thousands of properties in a market glutted by home foreclosures that outstrip demand.
The total share of distressed properties as a percentage of total home sales is actually down by 2% from the fourth quarter of 2010, but that year saw an unprecedented number of foreclosure listings hit the market. Last year’s results were significantly lower primarily because of delays in the foreclosure process across the country as a result of foreclosure fraud scandals.
This means that hundreds of thousands of delayed foreclosures will more than likely hit the market in 2012, meaning the share of total home sales that are distressed properties will more than likely eclipse the 26% mark achieved in the fourth quarter of 2010. In fact, figures released in a few months will in all likelihood show a dramatic increase in the first three months of this year – a trend that most experts predict will continue throughout 2012.
If foreclosures and short sales continue to form a growing portion of total home sales, what impact will that have on the market as a whole? And what is the ceiling for the statistic? Chances are, housing prices will take yet another hit and could actually dip in most places after battling to a standstill over the past 6 months.
As far as a ceiling goes, experts are reluctant to put a percentage to the trend, but it is not out of question to see distressed properties sales hit the 30% mark within the next 12-18 months. That would be a historic high for the market.
Source: Foreclosure Deals
