subject: Distressed Properties Sales Increase to 50% [print this page] Distressed Properties Sales Increase to 50%
Campbell/Inside Mortgage Finance reports the following distressed properties sales data in this months HousingPulse Tracking Survey:
The share of distressed properties sales, which includes bank-owned properties (REO) and short sales, was up from 47.2 percent in December, and well above the 44.5 percent share seen back in November.
First-time homebuyer activity slipped to 35 percent in January, down from 37.7 percent in December as mortgage rates crept higher and the FHA loans got more expensive. FHA lending garnered just a 27.7 percent share of mortgages, down from 30.2 percent in December.
The survey predicts additional downward pressure on pricing as the amount of distressed properties increases and the amount of first-time buyers decreases, especially for the categories of damaged REO properties and move-in ready REO properties. Over the past 12 months, time on market for the REO categories has strongly increased while the average number of offers has decreased. Also over the past 12 months, average prices for damaged REO have declined by 16 percent while average prices for move-in ready REO have declined 20 percent. Non-distressed prices have declined only 4 percent while the prices for short sales have been nearly flat.
Campbell/Inside predicts if market trends continue the majority of all homes sold in the United States will be distressed properties within just a few months. http://loanrateupdate.com/mortgages/distressed-properties-account-for-half-of-home-purchases
REI Maverick's opinion on distressed properties sales trend
2 items stand out as a result of the survey on distressed properties sales. First, I do agree that more and more sold real estate will be due to distressed properties sales because more of this real estate is becoming available. In fact, distressed properties sales aren't projected to get under one million transactions per year until 2013. Therefore, people will be buying these REOs and short sale properties at a discount, continuing the decline in pricing in the housing market. This increase in distressed properties sales also means that more houses that have no equity and little equity will increase and create a market for creative acquisition strategies, such as mortgage assignments.
The second item that stands out that in this case I don't agree with is the statement that mortgages are falling because interest rates are slowly increasing. A 5% mortgage interest rate is not going to scare potential homeowners away. In fact, when owner financing properties, I'm able to write much higher interest rates and find plenty of buyers. The reason fewer mortgages are being written is due to the fact that fewer people, especially first time homeowners with little job experience or credit score history, are able to qualify for conventional financing.
Due to the increase in demand distressed properties sales and the decrease in mortgages being written, we are seeing the need for new, creative acquisitions and selling strategies. Let me be clear about this: there are more properties available for sale at lower prices (high supply) and more people wanting to buy properties but can't qualify (high demand). Does this scenario sound like an opportunity to you?
Mortgage assignments is a creative acquisition strategy that allows distressed properties sales to happen because it allows you to sell an 'unsellable' home (due to little or no equity) to 'unloanable' buyers (due to low credit score or being self-employed). Distressed properties sales will be the future of this industry, and real estate professionals looking to thrive in this ever changing economy will become active in mortgage assignments.
If you liked 'Distressed Properties Sales Increase to 50%', then you may also enjoy other articles written by Phill Grove, the REI Maverick at www.REIMaverick.com
