Foreclosures accelerated in the second quarter, driving down home prices and accounting for nearly half of all sales in several states.
Nationally, homes sold at foreclosure accounted for 24 percent of all residential sales in the second quarter of 2010, RealtyTrac reports.
The average price of properties sold while in some stage of foreclosure was more than 26 percent below the average for properties not in the foreclosure process.
“It’s obvious foreclosures remain a major drag across the U.S.,” says Robert Dye, senior economist at PNC Financial Services Group. “Pioneering buyers with low mortgage rates will continue to take advantage of these properties. It’s going to take quite awhile to work through this inventory. It will take a few years, not months.”
A total of 248,534 U.S. properties in some stage of foreclosure – default, scheduled for auction or bank-owned – were sold to third parties in the second quarter. That’s up almost 5 percent from the first quarter, but down 20 percent from second-quarter 2009.
Some states were especially hard hit. Foreclosure sales accounted for nearly 56 percent of all sales in Nevada in the second quarter, the highest percentage of any state. Ranked second was Arizona, where foreclosure sales accounted for 47 percent of all sales.
In California, 43 percent of sales were foreclosure properties. Other states where foreclosures were large shares of all sales were Rhode Island, 37 percent; Massachusetts, 35 percent; Florida, 34 percent; and Michigan, 33 percent.
The uptick in foreclosures comes despite a federal effort to help homeowners struggling to retain their homes get modified mortgages with more affordable payments, as well as efforts by lenders to reduce payments for some borrowers.
“It’s clear this will be with us for some time,” says Lawrence Yun, chief economist with the National Association of Realtors.
Foreclosures used to be rising because so many borrowers had taken on mortgages they couldn’t afford, he says.
“The further we go, more foreclosures will be related to the job market rather than people who overstretched,” Yun says. “There will be more traditional reasons for the foreclosures.”
Foreclosure sales could pick up now that a federal tax credit for home buyers has expired, economists say.
The credit gave borrowers the flexibility to bid on houses at higher prices.
Without the credit, demand for lower-priced foreclosed homes could pick up. And that could pull down overall prices further.
“Prices will fall and will put more people into negative equity, which causes more people to (go into) foreclosure,” says Mark Zandi at Moody’s Analytics.com.
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