According to a recent Business Week article, distressed properties (meaning properties that sell as a foreclosure or a short sale) sold at an average 26% discount in the second quarter 2010. Bank-owned properties sold at an average 35% discount and accounted for 15% of total sales. Nationally almost 25% of transactions- or 248,534 homes- involved properties that were in trouble with their mortgage, representing a 5% increase over the first quarter. However, that number was down 20% from the seconde quarter 2009.
The discount rate is arrived at by comparing the average sales price of distressed properties to non-distressed properties. The average sales price of a distressed property was $174,198. The average price for a bank-owned property was $154,147, versus $204,932 for homes in default or scheduled for auction.
The pressure from distressed properties upon the market is not expected to abate in the near future. In August there were 95,000 home repossessions, reaching a new record for the third time in five months. Sales of distressed properties will likely account for 25%-33% of all transactions through 2011. But the most sobering statistic might be that before the housing crisis distressed properties represented a scant 1%-3% of total sales.
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