Number of short sales falling
Over the past few months the number of short sales has gradually been falling. According to a RealtyTrac report, fewer lenders are willing to sanction short sales due to the fact that property prices are increasing.
The article in Inman News shows that in October, national short sales accounted for just 5.3% of all sales compared to the previous month when they accounted for 6.3%. In October last year the number of short sales was 11.2% of total sales.
A recent report by the National Association of Realtors shows that short sales tend to sell at an average of 14% below market value. Towards the end of 2011 and early last year, the number of short sales surged. Now it’s becoming more usual for distressed properties to be disposed of through bank owned sales and foreclosure auction sales.
At least part of this shift in the way distressed properties are being disposed of is due to inventory shortages. Recent figures have shown that foreclosure inventory in the US is now at its lowest level since the end of 2008. It has fallen nearly 30% in a year, and stood at 1.28 million in October. Home prices are rapidly increasing, and there’s still strong demand from cash buyers and institutional investors, both of whom are able to buy at foreclosure auctions. As a result short sales are becoming a far less preferable method of getting rid of distressed properties.
A year ago foreclosure auction sales accounted for just 1.3% of sales to third parties, but this is now increased to 2.5% of all sales. Property sales of REO homes (real estate owned) repossessed by banks rose slightly in October, accounting for 9.6% of sales compared to 8.9% a month earlier. This figure is largely unchanged from a year earlier when it was 9.4%. In October cash sales accounted for 44.2% of all residential sales, up from 33.9% in October last year.