Purchase Foreclosure Homes at Still Low Prices This Year

by on Foreclosures

Opportunities to purchase foreclosure homes at low prices still abound this year because of the expected waves of foreclosures that will continue to pull down prices, according to studies by Standard & Poor’s Financial Services LLC and John Burns Real Estate Consulting Inc.

The two research firms said that low home prices will still abound in several parts of the country, particularly Arizona, Florida, California and Nevada, because the federal loan modification program will not be able to save the majority of distressed properties from foreclosure.

According to John Burns, about 5 million troubled homes and condo units this year will enter home foreclosure auctions or distressed processes over the next couple of years. These units represent the majority of the 7.7 million homes estimated to be in serious delinquency.

These units also comprise the shadow inventory analysts have been talking about. The shadow inventory in Orlando is expected to make the housing market full of foreclosures for 27 months. In the cities of Las Vegas and Miami, the supply of shadow-inventory properties would be equivalent to 24 months and 18 months, respectively.

John Burns analysts also said that investors will continue to purchase foreclosure homes and bankruptcy houses and not wait for further price declines because they expect that price drops would not be as sharp in the previous year despite continued foreclosures. More owner occupant buyers have also been competing with investors in the purchase of low-priced homes.

Additionally, another real estate firm has predicted house price declines in several markets, based on the reversal of price improvements in the middle months of last year. This firm reported that one in five markets experienced house price declines in the last months of 2009.

Out of the 143 housing markets monitored by the firm, 29 markets, including large markets like Atlanta, San Diego and Boston, posted price drops or flat prices in the latter part of 2009 after five months or more of posting substantial price increases.

Home prices in 29 markets, including New York and Los Angeles, increased in the last months, but the pace of increase slowed considerably in December in 21 of these markets. Nationwide, home values dropped by 5 percent in the final quarter last year compared to the same quarter in 2008.

According to economist Stan Humphries, buyers can still purchase foreclosure homes at attractive prices this year because the housing market is still correcting the price inflation that occurred during the boom.

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