NEW YORK—Fifty-five percent of U.S. adults would consider buying foreclosed properties, according to a survey released by RealtyTrac and Trulia on Wednesday. It is welcome news for the housing crisis that sees a 12-month inventory of homes on the market—up from an average five-month stock.
“Foreclosures are at the heart of the housing crisis,” said Peter Flint, CEO and co-founder of Trulia. The multi-listing site currently has almost 3.5 million homes for sale.
“Consumers are more interested than ever in buying foreclosures,” he said. “First time home buyers have some money, have stable jobs, they have been sitting on the sidelines waiting.This is a way for them to get on the first rung of the housing ladder.”
The government is on the right track with their packages to help homeowners avoid foreclosure and the $8,000 credit for first home buyers, according to the survey.
The $8,000 credit may also be used for a down payment, as announced by Secretary Donovan recently. “This should stimulate more first home buyers,” said Rick Sharga, senior vice president of RealtyTrac, the leading online marketplace for foreclosure properties. Of the entire home buying market, 50 to 60 percent of sales are going to first home-buyers, and 30 percent to investors, he said.
Flint agreed, saying it’s a potential boon for young home buyers, aged 18-44, the largest group interested.
“Transactions are up significantly,” he said. Las Vagas sales have almost tripled compared with 12 months ago. Florida and California sales are also up.
“There are a significant number of price reductions,” Flint said.
The average discount on a distressed property is around 30 percent said Sharga. Reports are showing that 80 to 90 percent of the properties selling are bank owned or foreclosures, in the hardest-hit areas such as California, Nevada, Arizona, and Florida.
There is a large stock of properties that have already been through the foreclosure process and are now bank-owned. Sharga said this adds another 300,000 to 400,000 to the list of properties in inventory. Only about 30 percent of these “shadow inventories” have been relisted, he said. “It is unlikely the banks will release them all at the same time.”
When loans start coming up for refinancing, there could be about $60 to $100 billion of loans to be reset, Sharga said. “When they reset, very likely they will foreclose.”
The owners are already “upside-down” on paper, Sharga said, with the loan-to-value ratio unbalanced. “They are going to be a problem when they hit.”
“The bad news is we don’t quite see the bottom yet,” Flint said. “The good news is that things are getting less worse.”
