Sales of Existing Homes Rise as Buyers Grab Foreclosures
Home sales rose in 49 states and Washington, D.C., according to a report released Tuesday by the National Association of Realtors. Total existing home sales increased by 8.3 percent to 5.14 million, up from 4.75 million in the last quarter of 2010. The only state not to not see growth in the quarter was Vermont.
The uptick can be largely attributed to more investor and repeat-buyer purchases. Investors made up 21 percent of sales, up from 18 percent a year ago, while repeat buyers were 47 percent of the market, up from 40 percent.
The growing prominence of these cash-ready homebuyers reflects tight credit conditions that continue to keep first-time buyers priced out of the market. First-time buyers accounted for only 32 percent of the homes purchased in the recent quarter, down from 42 percent last year, when the homebuyer tax credit (of up to $8,000) was still in effect.
A trend continuing in this year's first quarter is the popularity of distressed properties, which typically are 20 percent cheaper than homes not in foreclosure, according to NAR figures. Those homes accounted for 39 percent of sales this quarter, up from 36 percent a year ago.
Lower priced homes saw the biggest sales increase this quarter, in part because of all-cash buyers. The median existing home sales price fell to $158,700 -- down 4.6 percent from $166,400 this time last year.
But as the overhang of distressed properties shrinks, home sale prices will eventually start to rise, according to NAR chief economist Lawrence Yun.
"The rising sales trend in nearly all states is a part of the healing process to clear off inventory," he said in a press release. "Sales need to rise before prices can firm up."
First-time buyers should take note, however, that foreclosures are not the only bargain properties. With such a huge inventory of homes available, first-timers should compare prices on all the properties in their area before undertaking the often complicated process of buying a foreclosure.
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