Sales of Foreclosed Homes Up Despite End of Foreclosure Tax Credits

by Simon Lindsay on Foreclosures

The end of the U.S. federal government's foreclosure tax credits program did not prevent sales of foreclosed properties from rising in some areas of Virginia during the 2010 third quarter. In Richmond, foreclosure sales were over 20% of total housing sales.

Virginia Beach foreclosed homes and distressed properties in other areas of the state did well during the third quarter in terms of sales. In Richmond, 22% of total housing sales were accounted for by foreclosed properties. The figure represents a 14% rise compared with July-September 2009.

The average price of Virginia bank foreclosures for sale was $149,476 for the 2010 third quarter, which means that foreclosed houses are 40% cheaper than non-foreclosure residential properties. A total of 642 residences under foreclosure were sold during the year's third quarter. According to housing market analysts, the steep rise in the number of foreclosures accounting for home sales is more worrying than the heavily discounted prices.

According to them, statewide and national foreclosure sales percentages have leveled off and remained steady, a trend that has been expected since the second quarter end of the foreclosure tax credits. However, the foreclosed residential sales trend in Richmond for the quarter, analysts have stated, is contrary to state and national trends and took most of them by surprise.

Meanwhile, sales of bank foreclosures and other distressed houses for the whole state remained almost the same as the 2009 third quarter, accounting for 23% of the total residential property sales. The average price was $299,933, representing a 34% difference when compared with the price of regular homes.

Housing market experts are predicting that demand for foreclosed houses, nationwide and statewide, will decline for the rest of 2010 as buyers become uncertain about the benefits of purchasing distressed homes following the documentation controversy surrounding lenders' processing of foreclosures.

They stated that the end of the foreclosure tax credits also contributed to the decline in demand. However, most market observers believe that for the whole 2010, around 35% of nationwide home sales will be accounted for by foreclosed dwellings. The supply of foreclosures is also expected to continue to be high until 2011 since an inventory backlog has been created by the month-long moratorium on foreclosure sales.

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