Buyers throughout the U.S. are finding attractive home prices, and some are able to take advantage of significant markdowns on distressed properties. The extent of the discount varies widely by region, but according to the most recent data, foreclosures sold for 26% less than similar homes in the second quarter of 2010. Properties in default, many of which became short sales, had their prices reduced by an average of 13%.
Promising Signs
Even in the midst of crushing job losses and a severe recession, both new and existing home sales managed to stage comebacks in the middle of 2009. Although home sales lost some ground late in 2009 and early 2010, housing markets may have turned a corner.
The rebound in demand was aided by falling home prices, the federal tax credit for first-time homebuyers and Federal Reserve purchases of mortgage-backed securities to keep interest rates low. Depending on the measure used, the peak-to-trough drop in monthly home prices was anywhere from 13 percent to 32 percent. In many markets, prices fell by half or more—erasing the record run-ups earlier in the decade. Meanwhile, the federal tax credit for first-time buyers, initially set to expire in fall 2009, was renewed, expanded to include repeat homebuyers, and extended to contracts signed by the end of April 2010. Finally, interest rates on 30-year fixed mortgages averaged only 5.04 percent in 2009 and 5.00 percent in the first quarter of 2010.
As a result, the first-time homebuyer share of sales soared to 45 percent in 2009 as households previously boxed out of the market jumped at the dramatically lower prices. Bargain hunters buying up troubled properties largely drove the gains in existing home sales last year. The National Association of Realtors® estimated that the share of existing home sales that were distressed in 2009 averaged 36 percent per month, topping out at fully 49 percent in March.
For a complete review of the State of the Nation's Housing see the full report online
