Home sweet home has been anything but for scores of Americans these past few years, and the picture hasn't brightened much to date.
The housing market is still hurting and the foreclosure fiasco continues to loom despite record-low mortgage rates.
Homes in some stage of foreclosure accounted for more than one in four home sales during the first quarter of 2012, RealtyTrac reported today (Thursday).
Distressed properties that were either in default, scheduled for auction or bank-owned made up 26% of all residential sales during the first quarter. That was up from 22% in the prior quarter and 25% from the same period a year earlier, according to Thursday's data.
Brandon Moore CEO of RealtyTrac said in a statement "Foreclosure-related sales picked up in the first quarter, particularly pre-foreclosure sales where a distressed homeowner is selling to avoid foreclosure – typically via a short sale."
Moore added that pre-foreclosure sales, frequently sold as short sales, hit a fresh three-year high during the quarter "even as the average pre-foreclosure sales price dropped to a record low."
Short Sales Fill Housing Market
Short sales amounted to nearly 110,000 in the first quarter of 2012, an increase of 25% from a year ago, making up 12% of all homes sold during the quarter.
In short sales, borrowers who owe more on their mortgages than their homes are worth, agree with the bank to sell their homes at the lower market value. In return, the bank agrees to eat the loss.
With some 30% of mortgage borrows underwater, short sales are becoming the favored way for banks to unburden properties in default.
As a rule, banks usually receive 20% more for a short sale than they would get for a foreclosed home. Another advantage is that short sales usually close much quicker than foreclosed homes, which can sometimes take years. During that time property taxes, insurance, upkeep and other expenses buildup.
During the first quarter, short sale homes sold for an average price of $175,461, the lowest level since RealtyTrac began tracking foreclosures in 2005. It took an average of 306 days to complete a short sale during the first quarter, in comparison to the 370 days for a foreclosure.
"Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short sale transactions," Moore noted.
Meanwhile, sales of properties repossessed by the banks, called REOs, fell 15% year-over-year to 123,778, encompassing 14% of all sales during the quarter.
Record Low Mortgage Rates
Record low mortgage rates have done little to help the struggling housing market.
For the fifth consecutive week, the average rate on a 30-year fixed mortgage fell to a record low.
The rate dipped to 3.75% in the week ending May 31, according to mortgage giant Freddie Mac in its weekly report. It marked the lowest in Freddie's records dating back to 1971.
The average rate on the 15-year fixed also hit a record, slipping to 2.97% from 3.04% a week earlier. It is also the first time the rate rested below 3%.
While definitely good news for the ailing housing market, the historic low rates have not had much of an impact in igniting sales.
"It is good news for the housing market, but the problem for the housing sector isn't that borrowing costs are high, it's that banks are unwilling to lend," Millan Mulraine, a senior U.S. strategist at TD Securities Inc. in New York told Bloomberg News.
In other U.S. housing market news, the S&P/Case- Shiller index of property values dropped 2.6% from a year earlier following a 3.5% decline in February, the National Association of Realtors reported May 29.
Related Articles and News:
- Money Morning:
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- Money Morning:
Case-Shiller Index: Is This the Housing Market Bottom?
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- CNN Money:
Foreclosures made up 26% of home sales in first quarter