In another of a long series of data that show that the housing market has healed, or even reached the point at which a new bubble has been created, RealtyTrac reported that foreclosure sales fell 22% in the first quarter from the same period a year earlier. The trouble behind the numbers is that foreclosure sales usually undermine the value of nearby homes. That, in turn, makes a complete housing recovery much more difficult, in a environment in which price matters as much as unit total sales.
According to RealtyTrac's foreclosure market report:
[It] released its Q1 2013 U.S. Foreclosure & Short Sales Report, which shows a total of 190,121 U.S. properties in some stage of foreclosure or bank-owned (REO) were sold during the quarter, a decrease of 18 percent from the previous quarter and down 22 percent from the first quarter of 2012. These foreclosure-related sales accounted for 21 percent of all U.S. residential sales during the first quarter, down from 25 percent of all sales in the first quarter of 2012 and down from a peak of 45 percent of all sales in the first quarter of 2009.
The negative effects of this were compounded by the fact that:
Properties not in foreclosure that sold as short sales in the first quarter accounted for an estimated 15 percent of all residential sales - bringing the total share of distressed sales during the quarter to 36 percent. Non-foreclosure short sales also trended lower in the first quarter, down 10 percent from the previous quarter and down 35 percent from the first quarter of 2012.
While short sales may not damage overall housing values as much as foreclosure sales do, they do not help them.
RealtyTrac expresses the concern that short sales, along with foreclosure sales, keep many home prices low. This, in turn, keeps many mortgages underwater as the values of many homes still sit well below 2005/2006 levels. The research company claims that "eleven million homeowners nationwide are still underwater."
The number of booby traps in the housing market may have fallen somewhat, but the negative cycle of foreclosure sales and short sales continues to drag down prices on millions of other homes. Many of these are in the markets most badly damaged in the past five years. Particularly, according to RealtyTrac, in these states:
States with the biggest percentage of foreclosure-related sales were Georgia (35 percent), Illinois (32 percent), California (30 percent), Arizona (28 percent), and Michigan (28 percent).
The real estate price recovery is still a long way off, particularly in regions where home values continue to be cratered.
Filed under: 24/7 Wall St. Wire, Housing, Research Tagged: featured