February 13, 2012 (Shirley Allen)

Despite solid gains in home sales towards the end of 2011, the best showing since the homebuyer tax credit induced sales in the first half of 2010, home prices and appraisals are still expected to be affected by the downward pressure brought on by the sale of lower priced distressed properties.

Campbell/Inside Mortgage Finance reports that through the end of November, distressed properties accounted for 46.1 percent of home purchases using a three-month rolling average. It was the 23rd consecutive month that distressed property sales had accounted for over 40 percent of all sales.

Shorts sales accounted for 17.6 percent of the home purchases during that period followed by move-in ready REO properties at 15.2 percent with damaged REO properties taking a 13.3 percent share of total home purchases.

REO median prices varied vastly depending on whether the property was move-in ready or damaged. The median price for move-in ready REO properties was $189,700, while the median price for damaged REO properties was far less at $98,600. The median price of a short sale was $209,200 and non-distressed properties sold for a median price of $258,900.

On average, damaged REO properties sold in just 9 weeks while move-in ready REO’s sold for in 10.1 weeks, both 15 month lows.

Appraisals that included distressed property sales in their calculations continued to be a source of contention with real estate agents as the impact of the lower prices was making it difficult to get non-distressed homes to appraise, keeping the market from making a comeback in some areas.

An agent in Maryland reported, “The foreclosure/short sale markets are making it difficult to get non-distressed homes to appraise. This is holding off a market comeback in my area,” while another agent in Florida said, “We could sell the homes for more but the appraisals are an issue since they are using short sales and foreclosures as comps.”

With almost four million homes in foreclosure and in the shadow inventory, their impact on overall market prices should be expected to be felt for some time to come.

Tags: distressed properties, REO, move-in ready, damaged, foreclosure, short sales

Campbell/Inside Mortgage Finance