REO’S


Living near an occupied property in foreclosure can bring down home prices nearly twice as much than just living next door to a vacant home, according to a new study by the Federal Reserve Bank of Cleveland, which analyzed sales data of nearly 10,000 homes in the Cleveland area.

“The impacts of homes with multiple indicators of distress are larger than the impacts of homes that are only vacant, delinquent, or recently foreclosed,” the researchers found.

Some findings from the study:

  • Homes within 500 feet of at least one vacancy sold 0.8 percent lower.
  • Occupied home that had recently entered the foreclosure process lowered the sales price of nearby homes by 1.8 percent.
  • Sales within 500 feet of a home where a delinquent borrower abandoned the home saw, on average, a 3.1 percent drop to home values.
  • The largest drop was from homes that were tax delinquent, vacant, and foreclosed: Home sales prices within 500 feet were found to be 9.6 percent lower.

Source: “Study Finds Foreclosures Harm Home Prices More Than Vacancies,” HousingWire (Oct. 20, 2011)

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REO Resales in CA

By ft Editorial Staff • Jul 25th, 2011 • Category: Charts

Chart last updated 7/25/11

Total REO Resales Quarterly*

2nd Quarter 2011 1st Quarter 2011
2nd Quarter 2010
2nd Quarter 2009
39,058 36,577 40,171
56,879

Total REO Resales Annually*

Total REOs 2010
Total REOs 2009
Total REOs 2008
Total REOs 2005
155,357 202,054 158,010
2,422

REO Resales as a Percentage of Total CA Home Sales*

2nd Quarter 2011 1st Quarter 2011
2nd Quarter 2010
2nd Quarter 2009
36% 40%
33%
46%

Tracking REOs as the economy recovers

The above chart tracks the number of California residential properties resold quarterly by lenders who acquire ownership by foreclosure. These properties are also commonly called “Real Estate Owned” properties (REOs).

REO resales rise and fall as a function of economic well-being based on multiple factors, including the employment status and wealth of homeowners, FRM rates, ARM financing, lender solvency and efficiency, and the price of homes. At the time of this writing, the inventory of REOs on the market remains five to six times higher than is normal, and will continue to be driven by the wave of foreclosures that heralded the recently-ended Great Recession.

As the chart above indicates, a significant percentage (approximately 40%) of all homes sold since 2008 have been REOs. The ratio of REO sales to total sales ordinarily rests at approximately 7%, as was the case in 1999. However, as the job market begins to recover and lenders regain solvency, the number of NODs and Trustees deeds is expected to remain strong, if not rise, well into 2014. It will then head for an equilibrium rate of below 10% REOs of all sales in the MLS marketplace, most likely in the 2017 period. [For more information on the total number of home sales in CA, see first tuesday’s Market Chart, Home Sales Volume and Price Peaks.]