The number of homes being purchased with cash has been rising and hit 42 percent in Nov. 2013, according to a recent report by RealtyTrac, an online marketer of foreclosure properties. The purchase of foreclosure properties, whether at auction or directly from a bank, generally requires immediate full cash payment and may account for part of that figure.
“The housing market recovery continued to be driven by investors and other cash purchasers in November,” said Daren Blomquist, vice president at RealtyTrac.
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While property foreclosure rates have slowed and the housing market is strengthening, some cities have a glut of foreclosure properties for investors to peruse. Banks are eager to sell the distressed properties, but the question remains as to whether or not the economy is picking up enough to develop an influx of home buyers using conventional means.
Blomquist said, “Lenders are taking advantage of this environment to unload more of their bank-owned inventory and in-foreclosure inventory at the foreclosure auction. But as the backlog of distressed inventory available dries up in many of the markets with the most efficient foreclosure processes — namely California, Arizona and Nevada, with Georgia not far behind — overall sales volume is declining and will continue to do so until more non-distressed sellers enter the market.”
While it’s good news for banks to unload languishing foreclosed homes, the lack of new revenues in the form of writing new mortgage loans could be problematic.
REO sales in various states
Bank-owned homes (or REOs, short for real-estate-owned) accounted for an overall 10 percent of sales in Nov. 2013, a figure up from 9.1 percent in October. The numbers were much higher in some metropolitan areas, where REO sales made up 20 percent of the home sales in cities such as Stockton, Calif., Las Vegas, Cleveland, Riverside-San Bernardino, Calif., and Phoenix.
States reported to have the highest percentage of cash sales were Florida at a substantial 62.7 percent, Georgia at 51.3 percent, Nevada at 51.0 percent, South Carolina at 50.3 percent, and Michigan at 49.0 percent.
Home prices are also on the rise, and have been consistently for 19 months, according to the report. The national median sales price of all residential properties was $169,000. This figure is up 1 percent from October and 7 percent from November 2012.
RealtyTrac began tracking third-party foreclosure auction sales in January 2011 and since that time, sales to third-party investors accounted for 1.3 percent of all residential property sales in November. This figure was up from 0.8 percent in both the previous month and the same time a year ago.
Institutional Investor purchases represented 7.7 percent of all residential property sales in Nov., up from 7.1 percent in October and up from 6.3 percent from the prior year. Columbus, Ohio, Phoenix, Atlanta, Jacksonville, Fla., and Cape Coral-Fort Myers, Fla. are among the areas with the highest share of institutional investor purchases, according to the report.
Consider short sales
Homeowners in financial distress who wish to avoid foreclosure also turn to short sales. RealtyTrac reported that short sales made up 5.6 percent of all residential property sales in Nov. 2013. This figure was up from 5.4 percent the previous month but down from 6.5 percent in Nov. 2012.
This could be a sign of overall better health of the economy as fewer people enter into foreclosure and many avoid foreclosure by unloading their distressed property through other means. Meanwhile, housing sales continue to tick upward, along with slight increases in mortgage interest rates.
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