Foreclosure Homes Account for 24 Percent of Q2 Residential Sales

By RealtyTrac Staff

Sales Grow by 5 Percent to More Than 248,000 Foreclosure and REO Homes
Average Discount Drops from 27 to 26 Percent

IRVINE, Calif. – Sept. 30, 2010 — RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its Q2 2010 U.S. Foreclosure Sales Report™, which shows that foreclosure homes accounted for 24 percent of all residential sales in the second quarter of 2010 and that the average sales price of properties that sold while in some stage of foreclosure was more than 26 percent below the average sales price of properties not in the foreclosure process — down slightly from a 27 percent average discount in the first quarter.

A total of 248,534 U.S. properties in some stage of foreclosure — default, scheduled for auction or bank-owned (REO) — sold to third parties in the second quarter, an increase of nearly 5 percent from the previous quarter, but still down 20 percent from the second quarter of 2009.

“While foreclosure sales increased in the second quarter, non-foreclosure sales increased even more, spurred on by the homebuyer tax credit that expired during the quarter,” said James J. Saccacio, chief executive officer of RealtyTrac. “That had the net effect of lowering foreclosure sales as a percentage of total sales during the quarter, but that may be a temporary dip as the removal of the tax credit could drive more buyers back to discounted short sales and REOs.”

Foreclosure sales by type in second quarter
A total of 151,290 bank-owned (REO) properties sold to third parties in the second quarter, up 3 percent from the previous quarter but down 28 percent from the second quarter of 2009. REO sales accounted for nearly 15 percent of all sales in the second quarter, down from nearly 19 percent of all sales in the previous quarter and down from nearly 20 percent of sales in the second quarter of 2009. REOs sold for an average discount of nearly 35 percent, close to the average discount of 34 percent in the previous quarter and also to the average discount of just over 35 percent in the second quarter of 2009.

A total of 97,244 pre-foreclosure properties — in default or scheduled for auction — sold to third parties in the second quarter, up nearly 8 percent from the previous quarter but down 3 percent from the second quarter of 2009. Pre-foreclosure sales accounted for 9 percent of all sales, down from nearly 12 percent of all sales in the previous quarter but nearly identical to the 9 percent of all sales in the second quarter of 2009. Pre-foreclosure sales, which are often short sales, sold for an average discount of nearly 13 percent, down from an average discount of nearly 16 percent in the previous quarter and down from an average discount of 19 percent in the second quarter of 2009.

Nevada, Arizona, California post highest percentage of foreclosure sales in Q2
Foreclosure sales accounted for nearly 56 percent of all sales in Nevada in the second quarter, the highest percentage of any state despite a decrease in foreclosure sales from the previous quarter and from the second quarter of 2009. Nevada pre-foreclosure sales jumped 29 percent from the previous quarter and were up 2 percent from the second quarter of 2009, but Nevada REO sales decreased 14 percent from the previous quarter and were down 43 percent from the second quarter of 2009.

Arizona foreclosure sales accounted for 47 percent of all sales in second quarter, the second highest percentage of any state. Pre-foreclosure sales in Arizona increased 9 percent from the previous quarter and 15 percent from the second quarter of 2009 while REO sales increased 15 percent from the previous quarter but were down nearly 34 percent from the second quarter of 2009.

Foreclosure sales accounted for 43 percent of all sales in California in the second quarter, the third highest percentage among the states. California pre-foreclosure sales increased nearly 8 percent from the previous quarter but were down 4 percent from the second quarter of 2009. California REO sales increased 1 percent from the previous quarter but were down 45 percent from the second quarter of 2009.

Other states where foreclosure sales accounted for at least one-quarter of all sales were Rhode Island (37 percent), Massachusetts (35 percent), Florida (34 percent), Michigan (33 percent), Georgia (27 percent), Idaho (27 percent), and Oregon (25 percent).

Ohio, Kentucky, California post highest foreclosure discounts
Ohio foreclosures sold for an average discount of nearly 43 percent in the second quarter, the biggest discount of any state. Ohio pre-foreclosures sold for an average discount of nearly 24 percent while the average discount on Ohio REOs was double that at nearly 48 percent.

With foreclosures selling at an average price that was 41 percent below the average sales price of non-foreclosure properties, Kentucky posted the nation’s second highest average foreclosure discount in the second quarter. Kentucky pre-foreclosure sold for an average discount of 27 percent, and Kentucky REOs sold for an average discount of 48 percent.

California foreclosures sold for an average discount of 39 percent in the second quarter, the third-highest discount among the states. California pre-foreclosures sold for an average discount of 29 percent and California REOs sold for an average discount of 46 percent.

Other states with average foreclosure discounts of more than 35 percent were Michigan, Tennessee, Pennsylvania, Georgia, Illinois and Iowa, along with the District of Columbia.

Report methodology
The RealtyTrac U.S. Foreclosure Sales Report is produced by matching national address-level sales deed data against RealtyTrac’s foreclosure database of pre-foreclosure (NOD, LIS), auction (NTS, NFS) and bank-owned (REO) properties. A property is considered a foreclosure sale if a sales deed is recorded for the property while it was actively in some stage of foreclosure or bank-owned. The foreclosure discount is calculated by comparing the percentage difference between the average sales price of properties not in foreclosure to the average sales price of properties in some stage of foreclosure or bank-owned. States without sufficient foreclosure sales data to calculate average prices are not included in the report.

Glossary of Terms
Foreclosure (FC) sale: a sale of a property that occurs while the property is actively in some stage of foreclosure (NOD, LIS, NTS, NFS or REO). This includes only sales to third-party buyers or investors not involved in the foreclosure process. It does not include property transfers from the owner in default to the foreclosing bank or lender.

REO sale: a sale of a property that occurs while the property is actively bank owned (REO).

Pre-foreclosure sale: a sale of a property that occurs while the property is actively in default (NOD, LIS) or scheduled for foreclosure auction (NTS, NFS).

Pct. of all sales: total number of Foreclosure Sales (or Pre-Foreclosure Sales or REO Sales) as a percentage of all residential sales during the quarter or year.

Avg. FC sales price: the average sales price of Foreclosure Sales (or Pre-Foreclosure Sales or REO Sales) during the quarter or year, excluding sales with no sales price.

Avg. FC discount: the percentage difference between the average sales price of foreclosure sales and the average sales price of non-foreclosure sales during the quarter or year.

Avg. REO discount: the percentage difference between the average sales price of REO sales and the average sales price of non-foreclosure sales during the quarter or year.

Avg. pre-foreclosure discount: the percentage difference between the average sales price of pre-foreclosure sales and the average sales price of non-foreclosure sales during the quarter or year.

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