As the effects of lender-imposed foreclosure freezes wear off, an increase in sales of distressed homes in the coming months is likely to put additional downward pressure on U.S. home prices, foreclosure-tracking firm RealtyTrac said in a 2010 sales report today.
In total, 831,574 foreclosed U.S. homes sold to third parties last year, a 31 percent decline from 2009, RealtyTrac said. In New York, foreclosure sales also declined by 31 percent year-over-year.
But the steep drop-off — a result both of the homebuyer tax credit’s expiration in the third quarter of 2010 and the foreclosure paperwork scandal in the fourth — isn’t likely to last.
“There are plenty of foreclosures to sell, and so we think that as some of these issues get worked out, you’ll see foreclosure sales increase over the course of the year,” said Daren Blomquist, a spokesperson for RealtyTrac. “The banks are not going to hold onto these properties forever.”
Despite the declines, foreclosure sales, which over the past two years have hovered around a rate of 100,000 per month, accounted for more than a quarter of all residential sales nationwide in 2010. Blomquist said he expects to see that rate increase to 150,000 per month by the end of this year.
With foreclosure properties selling for an average of 28 percent off the sales price of non-foreclosure properties, that will mean more competition amongst sellers to lure bargain-hunters with plenty to choose from.
“The catch-22 for 2011 is that while accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices,” said James Saccacio, CEO of RealtyTrac.