The prices of distressed properties paired with mortgage rates below 4 percent continued to provide prospective buyers with many opportunities to make the transition to homeownership during the second quarter.
The sales of foreclosed houses accounted for roughly 23 percent of all transactions during the three-month period, according to a report from RealtyTrac. This was an increase from a 22 percent share the previous quarter and up from 19 percent a year earlier.
Although the share of foreclosure sales as a percentage increased, the total number actually declined, as there were only 224,429 transactions, a 12 percent decrease from the first quarter and a 22 percent drop on an annual basis.
"The second quarter sales numbers provide solid statistical evidence of what we've been hearing anecdotally from real estate agents, buyers and investors over the past few months: there is a limited supply of available foreclosure inventory to choose from in many markets," said RealtyTrac vice president Daren Blomquist.
Distressed property prices increase
As a result of fewer options, buyers may have become more competitive with each other, which caused the average foreclosure-related sales price to spike 6 percent from the previous quarter to $170,040, the report said. On an annual basis, this was a 7 percent gain.
Short sales a popular option
A short sale can be less financially damaging than a foreclosure to homeowners and lenders. Both parties continued to recognize the advantages of this process, and pre-foreclosure transactions surged 16 percent last quarter.
On a state-by-state basis, Michigan experienced the biggest increase in short sales, rising 42 percent, while Illinois also reported a notable gain of 35 percent, the report said.
Lawmakers recently introduced new initiatives that could further streamline the short sale process. Specifically, servicers of loans backed by Fannie Mae and Freddie Mac will no longer have to consult with the government-sponsored enterprises before approving a transaction.
This could cause more distressed borrowers to opt for short sales as an alternative to repossession in the near future. However, a Bush-era tax break which exempts these borrowers from paying taxes on the difference owed to lenders after short sales, is scheduled to expire at the end of this year. If it is not extended, some worry this could result in borrowers shying away from short sales.