A new “tidal wave” of foreclosures is expected in early 2011
A new survey by RealtyTrac and Trulia, two online real estate powerhouses, reveals that more and more Americans are realizing the benefits of buying REO properties.
49 percent of those surveyed said they would probably consider buying a foreclosure, up from 45 percent last May. Two-thirds of those who expected to receive a discount of about 30% of the normal price of such a house, which is in line with the 32% lower average purchase price of a foreclosure currently on the market, according to RealtyTrac .
The survey, conducted in conjunction with Harris Interactive, a leading custom market research firm, was conducted in November 2010.
The uptick demonstrates a growing acceptance of REO properties as a viable alternative by major homebuyers, which is good news for REO agents, brokers, and other professionals.
Although there has been a slowdown in foreclosures in the latter part of 2010, due to the foreclosure documentation issues major lenders have been experiencing, as well as the traditional moratorium on foreclosures during the holiday season, most real estate analysts project that the first quarter of 2011 will be an extremely busy one when it comes to REO listings.
This is because foreclosure shadow inventory is tightening again due to the aforementioned slowdown. “Even with this big drop in November, we have continued inventory of REO or foreclosed properties,” said Daren Blomquist, managing editor of RealtyTrac reports. “We are estimating that these properties plus delinquencies are equivalent to 3 million or 4 million homes waiting to go on the market.”
That will potentially create what “The Boston Globe” recently predicted would be another “tidal wave” of foreclosures in 2011. “The Wall Street Journal,” in a December 12 article, also sees a large surge on the horizon with the New Year.
“Next year could very well be a peak year for foreclosures,” said Rick Sharga, senior vice president at RealtyTrac, an online marketplace for foreclosed properties. “The market is expected to register around 1.2 million bank levies in 2010, up from 900,000 in 2009. We expect to exceed both numbers in 2011.”
Adding to the hidden inventory of REO properties will be new foreclosures as a result of continued high unemployment, as well as upcoming interest rate resets on adjustable-rate mortgages that will increase monthly payments for some homeowners. Homeowner loan modification programs that are currently behind schedule don’t seem to be working for most either.
Between the increase in the number of REO listings and the growing willingness on the part of potential buyers to consider buying REO homes, 2011 could be the biggest year for REO sales yet.
