Foreclosures make up 26% of home sales

Of all home sold in the U.S. last year, 26 percent were foreclosures and short sales, according to a RealtyTrac report released on Thursday. That’s down slightly from 2009, but a jump compared to 2008.

In Illinois, RealtyTrac said 29,194 distressed properties were sold, accounting for 26 percent of all sales last year.

“It’s like the post-holiday sales at Macy’s where they’re trying to clear out unwanted inventory,“ said Anthony Sanders, a real estate professor at George Mason University.

Homes already foreclosed on and repossessed by banks, called REOs (real estate owned), sold for an average of 36 percent less than normal sales, RealtyTrac reported. Meanwhile, the discount for homes sold while they were still in the foreclosure process (short sales) was 15 percent.

Nevada had the highest percentage of distressed sales of any state at 57 percent. That was, however, less than 2009, when 67 percent of sales there were foreclosures. In Arizona, 49 percent of sales were distressed properties; in California, 44 percent; and in Florida, 36 percent.

Foreclosed properties sold for the biggest discount — 50 percent off — in New Jersey.

These homes have attracted bargain hunters, including individuals or groups looking to buy and hold properties, according to Hoffman. They hope to buy at such a good price that they can rent out the properties and make a profit.

“These folks are cash investors who are going in and offering very low bids,“ he said.

NAR reported that all-cash sales went up to 32 percent of the total, up from 26 percent a year earlier. It estimated the percentage of investor purchases hit 23 percent up from 17 percent a year ago.

“Unprecedented levels of all-cash purchases — primarily of distressed homes sold at deep discounts — undoubtedly pulls the median price downward,“ said NAR president, Ron Phipps.

These investment opportunities are not going away. Nearly 30 percent of mortgage borrowers are underwater on their loans, owing more than their homes are worth, according to Stan Humphries, chief economist for Zillow, the real estate web site.

These owners are very vulnerable to foreclosure so the number of distressed properties that will go on sale only the next year or two will probably remained high.