Foreclosures Nearly One-Third of Homes Sold in Q1


These days, everybody knows that foreclosures make up a big part of home sales -- but just how big? Foreclosure data firm RealtyTrac has begun releasing a report providing precisely that information. On a cumulative basis, there were 232,959 foreclosure sales throughout the U.S. in the first quarter, accounting for 31% of all home sales. That might sound like a lot, but the number of foreclosure sales actually fell by 33% compared to a year earlier. On a state-by-state basis, the numbers vary widely.

As you might expect, the states with struggling housing markets generally have more foreclosure sales. Here's the top 10:

Top 10 foreclosure sale sts 2010-q1.PNG

It shouldn't come as a shock that Nevada tops the list: it's also the foreclosure capital. More than three out of every five homes sold in the state during the first quarter were foreclosed properties. California and Arizona are also some of the usual suspects, and slightly more than half of the homes sold in those states last quarter were foreclosures. Yet, considering that Florida was ranked third-worst for foreclosure concentration in the first quarter, it's a little surprising that foreclosed property sales only made up 38.7% of the state's total.

The report also includes another very interesting statistic: average foreclosure discount. This is basically just a measure of the average sale price of homes compared to the average sale price of foreclosed homes. On a national basis, the discount was 26.7%. Here's the state-by-state top-10:

Top 10 foreclosure discount sts 2010-q1.PNG

It's interesting to note that only three states on this list -- California, Illinois, and Georgia -- were on the quarter's top-10 list for highest foreclosure concentration (#4, #9, #7, respectively). It could be that since foreclosures aren't as common in those other seven states, such properties are viewed more negatively than they are in markets where foreclosures are very common. That could lead to lower prices.

It might seem startling that a foreclosed property could be purchased for 40% less than a regular sale in some markets, but that's not exactly what this statistic says. It doesn't tell you what these homes would have sold for if they weren't foreclosed properties. There are many variables at play here that could be bringing down foreclosed property prices. One is home condition. Since defaulted homeowners have no incentive to strive for a high resale value, they often don't always leave the properties in very good condition. Another is bargaining disparity. Banks probably don't have as much bargaining power to make counter offers as individual homeowners, since they mostly want to get rid of the inventory at a relatively fair price. In general, however, it is usually the case that a foreclosed purchase will occur at a discount compared to a regular sale.

Unfortunately, this data doesn't provide much foresight into how foreclosure sales and discounts will occur going forward. That depends more on how banks decide to slowly release their shadow inventory. RealtyTrac CEO James J. Saccacio says:

As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration.

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

The Time JFK Called the Air Force to Complain About a 'Silly Bastard'

51 years ago, President John F. Kennedy made a very angry phone call.

Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus


Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.


What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.


Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.


Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.


Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.


The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air



More in Business

Just In