Investors Fade While Short Sales Soar

Written by: Steve Cook   Fri, November 20, 2009 Beyond Today’s News, Market Activity

Investors buying homes to rent or sell accounted for only 15 percent of the housing market last month as they competed with large numbers of first-time homebuyers flooding the market to buy in time to qualify for the first-time homebuyer credit.  The percentage of first-time buyers closing on homes rose from 42 to 47 percent of all home sales in October, according to an Inside Mortgage Finance/Campbell Communications survey released today. 

However short sales-sales for less that the owner owes on the property-soared in October.  The short sale inventory is booming as owners who are underwater on their mortgages seek to dispose of their homes.  Short sales nationwide increased from 13 percent in June to 15 percent in October.  Some 30 percent of properties sold last month in California were short sales, which were particularly popular with first-time buyers.  They accounted for 57 percent of all short sale purchases, at an average price nationwide was $221,414.

Though investor purchases of bank-owned properties is declining, investors still accounted for more than half of the damaged bank-owned foreclosures sold during the month, and more than 72 percent used cash to make their purchases. About 13 percent of all homes sold were damaged REO properties.

Investors paid less on average than first-time and existing homeowners, an average of $186,831.  First-time buyers paid $192,884 and existing owners $299,963 on average.  Investors concentrated damaged REOs, which have declined from 20 percent to 15 percent of the market supply since July. 

Competition is hot for damaged REOs; they attracted an average of four offers each in October.  Damaged REOs sold for an average of $129,567, less than move-in ready REOs, short sales and non-distressed properties. However, the average price for damaged REOs has risen more than $30,000 since July while non-distressed property values are falling.  Damaged REOs spent the least time on market of any property type, an average of 7.5 weeks.

Short sales, on the other hand, spent the longest on market, 17.5 weeks, and received an average of 3.1 offers.  Forty-five percent of short sales were financed by FHA, which reflects their price and their popularity among first-time buyers.  Sixty-one percent of first-time buyers used FHA financing. 

The survey of 1500 real estate agents found that number of first-time buyers was easing as the deadline for the first-time buyer credit neared in October.  The credit has since been extended until April 30 and expanded to include move-up buyers as well.

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