Survey: Foreclosure Discounts Draw Investors

Affordable prices and foreclosures are attracting investors to the housing markets today, and the number of consumers interested in investing in real estate has doubled since March, according to a new survey from

According to the survey, one out of eight (12.1%) home buyers today plan to purchase a home as an investment property, compared to 5.6% seven months ago.

Foreclosure buyers, accounting for 25.3% of consumers interested in purchasing a home, are a major source of potential investment activity for today's housing market. Forty-two percent of potential foreclosure buyers regard their purchases as investments, while 57.6% plan to live in the foreclosed home themselves.

Thirteen percent of foreclosure investors intend to convert their foreclosures into rentals, 11.3% plan to fix them up for re-sale and 17.4% intend to house a family member until the home can be sold at a profit, the survey found. Of the 42% interested in purchasing a foreclosure as an investment, survey respondents aged 35 to 49 were, by far, the largest demographic, representing 52.6%.

The survey found foreclosure buyers expect to profit from both deeply discounted purchase prices, as well as healthy appreciation rates over five years. Most foreclosure buyers (58.2%) expect to pay 20% or less than market price for a foreclosure, while 38.5% expect a 25% or greater discount.Â

While 73% expect their properties to appreciate 10% or more in five years, 28% expect their purchases to appreciate 20% or more during that same time frame.

According to the survey, the most important factors motivating prospective home buyers and investors to purchase a house include concerns that prices are as low as they will go (23.6%) and desire to take advantage of foreclosure bargains (18.7%). The next most important reasons motivating property purchases include taking advantage of the selection of homes for sale in their community (21.2%) and concern interest rates will rise (14.2%).
The October 2009 survey also found that the federal government's approval rating by consumers on housing issues has slipped slightly since March. By a 6% margin, Americans said they don't think the government is doing enough to stabilize the housing market (48.2% compared to 42.2%), despite efforts to prevent foreclosures and keep interest rates low.

However, while 48.2% of respondents were negative about the government's job to stabilize the housing market, the priorities consumers have for the government related to housing haven't changed in the past year. According to the survey, consumers still want low interest rates (31.4%) and action by the government to help homeowners prevent foreclosures (28.5%) – the same two top priorities expressed by survey respondents in March.

The survey found that public participation in the Making Home Affordable programs to prevent foreclosures proved to be much lower than anticipated. In March, several days after the details of the programs were announced,'s Homeownership Survey found that 17.6% said they intended to participate in the administration's program. Seven months later, only 8.8% said they actually did participate.

While foreclosure filings reached record levels in the third quarter, homeowners today are actually less concerned that they or someone they know may be facing foreclosure as compared to seven months ago. In March, 52.5% of all survey respondents said they were concerned that they or someone they know may face foreclosure in the next six to 12 months. That number dipped slightly to 45.1% in October.

According to the survey, fear of foreclosure today is greater among women (49.3%), among people earning $50,000 or more annually (43.9%) and among people living in the South (42.6%) and West (55%).



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