Foreclosure homes accounted for one in four U.S. residential sales in the third quarter of 2010, according to RealtyTrac's Q3 2010 U.S. Foreclosure Sales Report. The average sales price of properties that sold while in some stage of foreclosure was more than 32% below the average sales price of properties not in the foreclosure process – up from a 26% discount in the previous quarter and the highest average foreclosure discount recorded by RealtyTrac since the fourth quarter of 2005.
A total of 188,748 U.S. properties in some stage of foreclosure (default, scheduled for auction or bank-owned)Â sold to third parties in the third quarter – a decrease of 25% from the previous quarter and a decrease of nearly 31% from the third quarter of 2009.
The average sales price of properties in some stage of foreclosure was $169,523, compared to $249,721 for properties not in foreclosure. Sales volume of non-foreclosure properties decreased 29% from the previous quarter and nearly 31% from the third quarter of 2009.
The expiration of the home buyer tax credit created a ‘substantial dip’ in buyer demand, notes James J. Saccacio, CEO of RealtyTrac. He says that controversy surrounding servicers' foreclosure processes could weaken demand further.
"A quick but responsible resolution to that issue would be ideal to help the market continue to properly clear out foreclosure inventory and get distressed properties into the hands of qualified buyers and investors who will likely add value to those properties and the neighborhoods they are in,’ he says.
Sales of real estate owned properties (REOs) to third parties dropped 26% last quarter to 113,933, but REO sales as a share of total sales held steady at about 15%. On average, REOs sold at a discount of nearly 41% (compared to 34% in the second quarter).
A total of 74,815 pre-foreclosure properties (i.e., in default or scheduled for auction) sold to third parties in the third quarter – down nearly 24% from the previous quarter. Pre-foreclosure sales accounted for nearly 10% of all sales – up slightly from 9% in the previous quarter. Such sales, which are often short sales, sold for an average discount of 19% -Â up from an average discount of nearly 13% in the previous quarter.
Nevada, Arizona and California posted the highest percentages of foreclosure sales, at about 54%, 47% and 40%, respectively. Other states where foreclosure sales accounted for at least one-quarter of all sales were Florida (37%), Massachusetts (35%), Michigan (32%), Georgia (29%), Oregon (27%), Idaho (25%) and Illinois (25%).
The steepest average discounts occurred in Ohio, Kentucky and Tennessee. Ohio foreclosures sold for an average discount of nearly 45%, Kentucky discounts averaged 44% below the average sales price of non-foreclosure properties, and Tennessee foreclosures sold for an average discount of 42%.
Other states with average foreclosure discounts of more than 40% were Illinois, New Jersey, Michigan, Pennsylvania and Georgia.