There was a time – and it wasn’t that long ago – when the first words a Realtor would hear from prospective buyers was, “What kind of foreclosures are out there.” Things have changed since then. There are still foreclosures on the market. But the choices and discounts are not nearly what they were a couple years ago.
Attom Data Solutions’ Q1 Foreclosure Market Report shows foreclosure activity nationwide was down 11% from Q1 last year. Here in the NE Tenn. market, the number was bigger. New foreclosures were down 54.7%. In real numbers, there were 113 fewer REOs and 80 fewer Notices of Trustee Shares. That’s below the pre-recession level on both the local and national levels.
“U.S. foreclosure activity on a quarterly basis first dipped below pre-recession averages in the fourth quarter of last year, and this report shows that trend continuing for the second consecutive quarter,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “The number of local markets dropping below pre-recession levels continues to grow, up from 78 a year ago to 102 in this report.”
What those numbers really show is there’s less economic stress in the market and that the distressed inventory – like the overall inventory – is getting tigher.
Take the first quarter of 2011 as an example. That’s the year the local market average price bottomed. The sales through began in the final months of 2008 and ended in the first month of 2009. During Q1 of 2011 there were 177 closings on foreclosure sales listed on the local Multiple Listing Service (MLS). They accounted for 20.6% of all sales in that quarter.
Fast-forward to this year. There were 161 closing on foreclosure sales that were listed on the local MLS. They accounted for 13% of all sales during the first three months of this year.
Of course, foreclosures sales totals reported by MLS total is not the entire picture. Some distressed sales are at auction. Others are short sales. And some are direct sales by the owners.
The difference is the market share, the discount and the pulse of the market.
The gain from average home sales price at the bottom of the market in 2011 to Q1 this year is a little better than 54%. Most buyers haven’t seen that much gain, but the overall market price has appreciated since those days. But that annual year-over-year appreciation has been in the low single digits.
The short-term average price trend line has been slowly improving since August last year. It took the big jump to 5.5% in March.
Those gains came not because there were fewer distressed sales, but because the was less economic stress and more conventional sales.
Foreclosures will always be part of the market picture. The traditional local foreclosure rate is a little less than 0.5%. It’s a little less than that now. So is the number of homes with mortgages that are delinquent and seriously delinquent.
The big question about the local housing market now is when will the pent-up demand be exhausted and where will the new normal be. That’s the big question because two of the three major components for housing market demand are soft: Population is on a very slow growth track and although new jobs are being created the rate is slowing, and real wage growth is weaker than it is in comparable counties across the nation.