On the heels of a report from Fitch Ratings released earlier this week showing that short sales of residential properties continued to rise during the past year, a report from RealtyTrac released Wednesday finds that short sales activity declined sharply in the first quarter of 2013.
RealtyTrac's Foreclosure & Short Sales report shows that short sales in the U.S. fell 10% from the fourth quarter of 2012 to the first quarter of 2013 and were down 35% from a year earlier, thus reversing the trend of the past two years.
RealtyTrac notes that the recent increase in home prices is causing some homeowners who were considering a short sale as an option to foreclosure to postpone the decision, in the hope that rising values will enable them to stay in their homes longer.
‘Rising home prices in many markets are stunting the continued growth of short sales by reducing incentive for both underwater homeowners and lenders,’ said Daren Blomquist, vice president of RealtyTrac, in a release. ‘Underwater homeowners may be willing to stick it out a few more months or even years in the hope that they will be able to walk away with money at the closing table and without a hit to their credit rating, and for lenders a failed short sale may no longer translate into bigger losses down the road given that average prices of bank-owned homes are rising – at a faster pace than non-distressed home prices in many markets.’
Recent data from RealtyTrac shows that 190,121 properties in the foreclosure process or already seized by lenders were sold in the first quarter – down 18% from the fourth quarter of 2012 and down 22% from the first quarter of 2012.
That accounted for 21% of all home sales, down from 25% in the first quarter of 2012, the company said.
However, foreclosure rates remain historically elevated. Foreclosure sales averaged less than 5% of all sales in 2005 and 2006 before the housing bubble burst, said Blomquist.
A total of 101,371 homes were seized by lenders in the first quarter of 2013, down 16% from the fourth quarter of 2012.
A total of 88,750 homes in default, but not yet foreclosed, were sold in the first quarter, down 20% from the fourth quarter of 2012, according to RealtyTrac.