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REO’s Are Back | Waccabuc Real Estate

Four years of declining distress sales quietly ground to a halt last year and now real estate owned properties (REOs) have increased steadily for four months in a row, rising to 23.2%, based on a three-month moving average, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.

The distressed property share of home sales peaked at 45.5% in March 2011 and declined to 21.3% as recently as September.

The numbers suggest that a market share for REOs will settle in at one out of five listings for the foreseeable future. “A distressed property proportion above 20% is likely to be a persistent feature of the housing market,” said Tom Popik, research director for Campbell Surveys.

M ove-in ready REO is the largest category of distressed property, accounting for 10.6% of home sales in January. The move-in ready REO share of home sales has increased most months after hitting a low of 8.2% in August 2013.

Popik said the largest portion of move-in ready REO properties will likely be purchased by first-time homebuyers. Such buyers accounted for 48% of purchases of move-in ready REO sold in January, with current homeowners claiming a 39% share and investors accounting for a 13% share.

Average home prices for move-in ready REO have increased since hitting a low of $171,300 in April 2013. Move-in ready REO sold in January had an average price of $221,000.

Damaged REO accounted for 8.0% of home sales in January, increasing for the fourth consecutive month. The damaged REO share of home sales hit a low in September at 6.3%.

Investors are the main buyers of damaged REO, purchasing 61% of such properties sold in January. Demand for damaged REO was particularly strong in January, with the properties receiving an average of 3.4 offers. However, time-on-market for damaged REO also hit a 4-year high during the month with properties sold in January having stayed on the market for an average of 13.0 weeks.

Short sales accounted for 4.5% of home sales in January, with market share for the properties staying level for the previous six months. The short sale share of home sales peaked in February 2012 at 16.8%.