A Tracking Survey from Campbell/Inside Mortgage Finance Housing Pulse released this morning indicated that sales of foreclosed and distressed property was up sharply in December:
“Sales of distressed property surged in December as many banks resumed foreclosures following stoppages in late fall. At the same time, first-time homebuyer activity remained strong as purchased rushed to close transactions before interest rates rise further.”
Housing Pulse’s Distressed Property Index measures the percentage of real estate transactions that involve distressed property. The index was at 47.2 percent in December, up from 44.5 percent in November. The December figures nearly eclipsed September 2010′s all-time high of 47.5 percent.
Sales of distressed property hit a temporary lull as banks backed off of foreclosures in response to the robo-signing foreclosure scandal. Despite this temporary moratorium, there were over 1 million repossessed homes in 2010, and more are expected in 2011 as banks once again ramp up foreclosures. Despite this, Thomas Popik, research director for Campbell Surveys noted that the surge in sales will likely ebb in the coming months:
“January and February are typically the slowest months of the year for home buying, and we’ll still have a backlog of foreclosed homes coming on the market during the winter, so prices may come under pressure too.”
It will be interesting to see what impact, if any, recent foreclosure litigation will have on the distressed property market. There has been a spate of cancelled and withdrawn foreclosures as the result of lawsuits and court decisions, and an upcoming Massachusetts lawsuit could potentially invalidate many foreclosure sales in that state. It is very possible lawsuits such as these could cast doubt over the rightful ownership of foreclosed property, which would really hurt the market for these types of homes. To illustrate just how important distressed property sales are to the market as a whole, sales of distressed homes constituted over 60 percent of all sales in California, Nevada, and Arizona in December. Even in states that weren’t hit as hard by the housing bubble, such as Texas, Oklahoma, and Louisiana, distressed property accounts for 30 percent of home sales.
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