Despite the fact that 2013’s foreclosure market was significantly down from that of 2012, in much of the country buyers reportedly flocked to purchase the repossessed homes. Much has been made about the rebound in home sales in 2013. What should be noted is that in 2013 16.2 percent of all home sales were foreclosed properties. What is more shocking is that, according to real estate market tracking company RealtyTrac, 29.1 percent of these sales occurred with all-cash deals, which was a significant increase from the 19.4 percent cash deals in 2012.
One of the reasons that so many foreclosures were purchased last year, despite the fact that overall rate of foreclosure fell, is because the overall number of foreclosures on the market is still extraordinarily high. According to RealtyTrac spokesman Daren Blomquist there are still 1.2 million bank owned properties in the United States. Even record foreclosure sales has not been enough to significantly clear out the inventory.
Another important reason that foreclosures continue to sell at high numbers is because they continue to represent incredible buying opportunities. For example, while the median home price for a traditional home in 2013 was $174,400, the median price for a bank owned home was just $108,500. It is for this reason that foreclosures are attracting homebuyers from all demographics, including those looking to purchase their first homes. But potential purchasers of owner occupied properties are not the only ones looking to the foreclosure market for a deal. Real estate investors – including many hedge funds, real estate investment trusts (REITs), and other institutional investors – are getting in on the action. For example, 2013 saw investors purchase 7.3 percent of all homes, another stat which was up significantly over 2012’s tally of 5.1 percent investor purchased homes.
The cities with the highest number of foreclosures sold in 2013 included the usual suspects such as Florida cities Jacksonville and Cape Coral, where respectively 38.7 percent and 24.9 percent of the overall home sales were foreclosures. Las Vegas, Nevada, which was also hit hard by foreclosures in recent years, saw its overall 2013 home sales market comprised of 18.2 percent foreclosures. Some cities which have not drawn headlines for having a high foreclosure rate, but nevertheless sold high percentages of foreclosed homes last year include Knoxville, Tennessee and Cincinnati, Ohio at 31.9 percent and 19.3 percent respectively.
Considering home prices continue to recover, experts are unsure exactly how the foreclosure market will be affected. On the one hand higher home prices will allow more people who cannot afford their mortgages to simply sell their homes, as they recover equity in strengthening market. On the other hand rising home prices may mean that banks are less likely to short sell, which is the process of allowing distressed homeowners to sell before the foreclosure process causes them to lose their homes. If the availability of short sales is reduced, it may mean that banks are more apt to wait out the time it takes to foreclose.