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Diane Gallagher

Are foreclosures on their way out? Short sales rise in popularity

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Posted: Friday, October 12, 2012 12:00 am

Here are some statistics from Realty Trac. As of last month, there were 1.47 million homes in some stage of the foreclosure process or owned by banks. Of the 620,751 in lenders’ possession, only about 15 percent are listed for sale, according to RealtyTrac.

Lenders are increasingly favoring short sales vs. waiting for troubled loans to go through the foreclosure process.

Short sales on properties that hadn’t even started the foreclosure process rose 18 percent between January and May compared to the same stretch of 2011, the firm said.

The decline reflects a thinner slate of properties for sale in many cities as banks take a measured approach to placing homes on the market.

Even so, foreclosure sales’ share of all home purchases grew in the April-to-June period, foreclosure listing firm RealtyTrac said Thursday.

The combination of fewer bank-owned homes for sale and stronger demand during the traditional spring home-buying season also pushed sale prices higher.

“Selling a bank-owned property has become a lot less attractive to lenders than it was in the past, and it just opens them up to additional risk,” said.

Bank-owned homes and those in some stage of foreclosure posted the biggest annual increase in average sales price since 2006, before the housing bubble burst, the firm said. “It boils down to supply and demand — limited supply and pretty strong demand - especially during the second quarter, when a lot of buyers come out of the woodwork and look to buy,” said Daren Blomquist, a vice president at RealtyTrac.

All told, 224,429 homes in the foreclosure sales category were purchased in the second quarter. That’s down 12percent from the first three months of the year and down 22percent from the second quarter last year, RealtyTrac said.

Foreclosure sales accounted for 23percent of all U.S. home sales, which includes sales of previously occupied homes and new homes. That’s up from 22percent in the first quarter and up from 19percent a year earlier, the firm said.

While rising, the share of foreclosure sales remains well below its first-quarter 2009 peak of 45percent of all sales. They comprised less than 1 percent of all sales in 2005, at the height of the housing boom.

While costing more, the average price of a foreclosure sale amounted to 32 percent discount on the average price of non-foreclosure homes, RealtyTrac said. The discount rose from 30 percent in the first quarter and second quarter of 2011.

The wider price gap this year between foreclosure sales and those of non-foreclosure properties reflects rising home prices as sales have improved.

There are other signs the housing market is finally improving. The Standard & Poor’s/Case Shiller index for June showed the first year-over-year increase in home prices since September 2010.

Sales of new homes in the second quarter were up 18percent from a year earlier. A of last month, they’re up 25 percent from a year earlier. Sales of previously occupied homes rose nearly 9 percent in the April-to-June quarter. They jumped 10 in July compared with the same month last year. Remember the $25 billion settlement that cleared the way for lenders to tackle the backlog of foreclosed homes, well the number of homes entering the foreclosure process is rising, and said to end up on the market next year.  Another wait and see.  They have been telling us that for the last three years.

Diane Gallagher is the president of the Lodi Association of Realtors and can be reached at