Number of Short Sales Dropping
What goes up, must come down.
While the price of homes and the number of home sales continues to rise each year, the number of short sales has dropped. Short sales, which are home sales in which the sale price is less than the total of the outstanding mortgages secured by the property, made up 5.3 percent of all sales in October, according to RealtyTrac’s monthly foreclosure report. That’s down from 6.3 percent in September and 11.2 percent in October 2012.
In the report, RealtyTrac Vice President Daren Blomquist explained the shift: “After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction sales and bank-owned sales,” Blomquist said. “The combination of rapidly rising home prices — along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO [real estate owned] home — means short sales are becoming less favorable for lenders.”
The national median sales prices stayed consistent from September to October at $170,000, which is a 6 percent year-over-year increase. The annualized sales rate hit 5.6 million, a 2 percent increase from September and a 13 percent surge from October 2012. Despite the drop in short sales, they remain a large part of real estate in states riddled with distressed properties. In October, 14.2 percent of Nevada’s home sales were short sales, the highest share among all states. Florida was runner-up at 13.6 percent, followed by Maryland (8.2 percent), Michigan (6.7 percent) and Illinois (6.2 percent).
While Blomquist cited cash sales as a contributing factor to the decline in short sales, some of those same states reported a high percentage of cash sales. Nationwide, such transactions — those that have no loan recorded at the time of sale — accounted for 44.2 percent of all sales, a 33.9 percent increase from the same time last year. The percentage of cash sales in September was revised to 45 percent.
Florida led all states with 65.6 percent of its sales completed in cash, followed by Nevada (55.5 percent), Georgia (55.4 percent), South Carolina (53.9 percent), Michigan (49.5 percent) and Ohio (49.2 percent).