30 May 2011

Short Sales, REO’s and Foreclosures

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Short sales and bank-owned properties sold for 42 percent less in Newport News than homes not facing foreclosure in the first quarter. Hampton short sales and bank-owned homes sold for 26 percent less, according to RealtyTrac, which monitors foreclosure activity nationally. The number of Peninsula-area foreclosure sales, 187, has fallen — dropping 27 percent from the fourth quarter of 2010, when it was 257, and 28 percent from the first quarter of 2010, when it was 259. Is that good news?

It depends on whether the trend continues over the next few months, said Dale Chandler, Virginia Peninsula Association of Realtors president. Banks have slowed processing foreclosures after they discovered mistakes from moving them through too quickly. And they’re under remendous pressure to offer loan modifications, and then short sales, before resorting to foreclosure, he said. “It’s way too soon to say it’s turned,” he said. In fact, the Hampton Roads Planning District Commission released a report Wednesday showing more
homes heading toward foreclosure. About 58 percent of foreclosure inventory is prime mortgages, unlike the earlier wave of subprime and alternative loans, according to the Richmond Federal Reserve. Based on delinquencies, roughly 10,500 homes with prime mortgages are likely to enter the market in the next year or two, plus 8,500 more that are distressed with subprime or interest only mortgages. With initial unemployment claims still up and job growth slow, foreclosures will continue. “This will add more homes (supply) to the total market, and put
further pressure on falling home prices,” the HRPDC report said.

The inventory of homes listed for sale will need to drop below a six-month supply before prices start appreciating. If new home construction and household formation hold steady, it’ll take 3.3 years to clear an excess supply of about 24,000 homes, assuming home sales maintain a 10,500-a-year pace, the report said. The average price of the 88 short sale or bank-owned homes in the first quarter was $105,646 in Newport News. It was $124,684 in Hampton for the 40 sales and $249,120 in James City County for 24 sales. York  County had 11 foreclosure-related sales with an average price of $237,986. The average sales price was $225,525 in Gloucester County, which had 12 foreclosure-related sales. It was $295,083 in Isle of Wight County for eight sales and $261,633 in Poquoson for four sales. Foreclosure-related sales in the first quarter accounted for 36 percent of Hampton sales, 37 percent of Newport News sales, 17 percent of York sales, 20 percent of Gloucester sales, 13 percent of James City sales, 14 percent of Isle of Wight sales and 22 percent of Poquoson sales.