Survey Finds Short Sales Outnumber REO in January Purchases
Short sales accounted for 15.9% of home purchases in January, surpassing the share of other distressed property activity, when real estate owned (REO) properties are measured separately, according to a monthly Campbell/Inside Mortgage Finance (IMF) survey of more than 1,500 real estate agents, conducted by Campbell Surveys. The share purchases taken up by short sales surpassed the share of move-in-ready REO purchases (13.8%) and damaged REO (13.4%). These figures show a reversal from a recent trend of fairly even distressed sales across these categories. As recently as November 2009, according to the Campbell/IMF survey, short sales accounted for 12.4% of purchases, while move-in-ready REO took 12.6% and damaged REO took 12.3%. The January survey also showed first-time homebuyers most often purchased short sales. Campbell/IMF attributed this trend to the fact first-time homebuyers tend to only have one sale and closing time line to work around, whereas existing homeowners often have to plan around selling a current residence at the same time of purchasing a new residence. “Short sales activity took a temporary dip in November around the expected expiration of the first-time homebuyer tax credit,” said Thomas Popik, research director for the Campbell/IMF survey. “Few first-time homebuyers wanted to take the chance that their short sale transaction wouldn’t be approved by the November 30 deadline. But now that the tax credit has been extended, we see first-time homebuyers once again snapping up attractively priced short sales.” Excellen REO president Cary Sternberg, in an exclusive contribution to HousingWire, recently warned of the risks involved with short sales, as 2010 is looking to be "the year of the short sale." Short sales are likely to be the choice of borrowers deeply underwater on their mortgages -- but these sellers will likely not be able to become buyers again from two to seven years because of their credit score and record of a short sale, Sternberg warns. This elimination of home buyers may lead to a greater supply of homes for sale, which could pressure prices further over time. Write to Diana Golobay.