Foreclosures Still One-Third of Residential Sales

The sale of houses in some stage of foreclosure accounted for 31 percent of all residential sales during 2Q11. The Obama administration is mulling plans to help the housing market. And despite Warren Buffett's $5 billion investment, the Dow was still down yesterday.

August 26, 2011
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Mr. T in DC

According to RealtyTrac’s second quarter 2011 U.S. Foreclosure Sales Report, which was released on Thursday, the sale of houses in some stage of foreclosure accounted for 31 percent of all residential sales during the quarter. That’s a drop from the first quarter of this year, when the total was 36 percent, but more than the same quarter a year ago, when the total was 24 percent.

Moreover, the price of a foreclosed house is still declining. RealtyTrac noted that the average sales price of foreclosed or REO homes was $164,217 in the second quarter, down less than 1 percent from the first quarter, but down nearly 5 percent from the second quarter of 2010. The average sales price for homes in foreclosure or bank-owned was 32 percent below the average sales price of homes not in foreclosure.

In a statement, James Saccacio, CEO of RealtyTrac, offered his opinion that there’s good news in these numbers. “With average prices on distressed real estate trending down and average discounts trending up, this report is clearly good news for well-positioned buyers and investors looking for bargain real estate that will build them wealth in the long term,” he said. “Maybe less evident, however, is the good news in this report for distressed homeowners looking to sell, and even lenders saddled with large portfolios of delinquent loans.”

Administration Ponders Home Refinance Plan

The New York Times reported on Thursday that the Obama administration, which has taken a fair amount of heat for lackluster efforts to provide succor to the housing market, is mulling more plans along those lines. One proposal is to allow homeowners with government-backed mortgages to refinance them at current, and historically low, rates. Homeowners should like the notion, since it would generally result in lower mortgage payments.

Retailers would probably also be keen on the idea, since a mass of refinancing would free up an estimated $85 billion annually for consumers to spend on something else — such as consumer goods. Refinance would thus a kind of stimulus for the U.S. economy with the added benefit (to the administration) of not having to ask Congress to approve it.

Holders of bonds backed by Freddie and Fannie mortgages reportedly aren’t so thrilled at the idea, since hard-to-refinance mortgages have made for some sweet returns in recent years. Investors in these bonds seem to have gotten wind of something in the works by the federal government, however, since the bonds have been trading lower in recent weeks, according to the Times.

Investors Wait on Word from Jackson Hole

Wall Street had a down day despite Warren Buffett’s $5 billion headline investment in Bank of America, which sent shares in the bank spiking upward. The Dow Jones Industrial Average lost 170.89 points, or 1.51 percent, while the S&P 500 was down 1.56 percent. The Nasdaq, reacting to the resignation of Steve Jobs, among other things, was down 1.95 percent.

Gold, which has taken a beating in recent days, seemed to have stabilized for the moment, inching upward on Thursday by 0.3 percent. Still, a stray word one way or the other from the chairman of the Federal Reserve might be enough on to send gold holders into another panic of buying, or maybe another panic of selling.

Or possibly investors in stocks and commodities are coming to the consensus that Ben Bernanke isn’t going to try to pull a QE3 rabbit out of his hat on Friday at Jackson Hole. They might also be worried about the potential impact of Hurricane Irene as it bears down on population centers of the East Coast and its infrastructure, with risks that include possible property losses in the billions.