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Real Estate

Foreclosure Sale Discounts Rising Across U.S.

Source: https://www.attomdata.com/news/market-trends/home-sales-prices/foreclosure-sale-discounts-rising-across-u-s/

Median Price of Foreclosed Homes 36 percent Less Than Median for All Sales in Third Quarter of 2020; Discount Up for Fourth Straight Quarter; Gap Highest in Lower-Prices Areas of Nation

Buying a foreclosed home in the United States isn’t always as sweet a deal as it looks on paper. It could sit in a distressed neighborhood or come with a long list of costly repairs, not to mention old liens that the bank didn’t pay off before putting it up for sale.

But for the risk of rolling the dice on an empty, sometimes decaying property, buyers nationwide typically get a discount of around one-third off the price of what other homes sell for in any given area. Lately, that discount has been improving.

The latest home sales numbers from ATTOM Data Solutions show that the median price of a foreclosed home in the United States – so-called REO properties taken over by lenders – stood at $180,250 in the third quarter of 2020. That was 36 percent off the typical $281,438 price of all homes sold from July through September of this year.

REO discount at best level since Q3 2017

While the gap varies widely from state to state, it has grown over the past year after several years of going in the wrong direction for buyers.

From the third quarter of 2016 through the first quarter of 2019, the discount declined from 40.2 percent to 33 percent. Over the past year, it’s been going back the other way, improving each of the last four quarters. The gap is nowhere near the peak discount over the past 15 years of 47 percent in 2005, but stands at the best level since the third quarter of 2017.

The recent improvement has come as the median price of all homes nationwide shot up 16.3 percent over the past year while the typical price of bank-owned properties increased just 12.7 percent.

Deepest discounts on REO properties in Midwest and South

Around the country, the price – and the discount – of foreclosed homes depends on the region and economic segment of the housing market.

Not surprisingly, the cheapest REO properties sit in areas of the United States that have the lowest-priced homes in general, mostly in the Midwest and South.

The median price for a bank-owned home was less than $150,000 in half the states in the South and all but one in the Midwest with enough data to analyze in the third quarter of this year. It exceeded $200,000 in half the states in the Northeast and every one in the West.

Key local market takeaways:

  • The biggest discount during the third quarter of 2020 came in West Virginia where the median $49,000 price of a bank-owned property was 73 percent off the typical $182,750 price of all homes.
  • In Michigan, the median $82,450 price of a bank-owned property was 57 percent off the broader median of $192,500.
  • At the opposite end of the discount spectrum, the typical REO home in Nevada sold for $278,000, or just 12 percent off the median for all homes of $315,000.
  • In Hawaii, the state with nation’s most expensive housing, the median price for a bank-owned property in the third quarter stood at $492,000, or only 15 percent off the $577,500 median for all homes.

Not only are prices of REO properties best in states at the lower end of the housing market, so are the gaps between bank-owned and all sales: in 12 of the 15 states where the typical bank-owned property cost less than $150,000 in the third quarter, the discount was better than the national level of 36 percent. The same was true in only one of the 13 states where bank-owned properties commonly cost more than $200,000.

To learn more about the data behind this article and what Attom Data Solutions has to offer, visit https://www.attomdata.com/.

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Advan

Advan provides hedge funds and institutional investors with unmatched insights into both foot and vehicle traffic to enable better investment decisions. Using precise, manual geofencing, it has the most extensive and accurate location data, available in seconds through an intuitive, self-service dashboard. Its institutional-grade analytics allow fast and actionable insights into customer behavior and corporate activity.

Advan is headquartered in New York City. For more information please visit www.advan.us