Bundled Sales to Investors

Posted on Tuesday, March 16, 2010

Another problematical component are current REOs held by banks and at what rate will banks dispose of those properties. Experts state that many of the REOs in high-demand areas (such as California) are being "bundled" in hundreds and sold to investors. However, these transactions are not reflected in NAR's existing-home sales data or inventory figures (homes on the market) and thus are difficult to estimate. As NAR's Realtor Confidence Index (RCI) suggests, the range of distressed sales by month (foreclosure sales and short sales as a percent of all sales) varies across markets.

The national rate of distressed sales has been falling - from a peak of 49 percent in the first quarter of 2009 to 38 percent in January 2010. As of November of 2009, prior to the foreclosure moratoria imposed by many states, the share of distressed sales ranged from 13 percent in New York to 66 percent in Michigan. While distressed sales include both REOs and short sales, foreclosures accounted for a higher portion in the high-foreclosure states: 66 percent in Michigan, 60 percent in Arizona, and 50 percent in California and Florida. This trend shows that foreclosure inventory is not only being sought by buyers who are seeking steeply discounted REO inventory, but it is sought after even in the worst hit foreclosure markets. Finally, according to NAR's RCI, foreclosed properties are mostly selling at about a 16 percent discount, while short sales are discounting about 13 percent. These discounts have also shown to be slowly decreasing since the first quarter of 2009. - NAR

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