New Report: The demand for distressed homes is dropping according to fresh data from online real estate marketplace Auction.com.
Online real estate marketplace Auction.com reported this week that demand for distressed properties, including bank-owned homes and foreclosures, has decreased for the second consecutive quarter.
In its Auction Market Dispatch for the third quarter of 2024, the company shared insights from a late September survey of over 140 active buyers on its platform.
The findings revealed that while 45% of respondents felt that current market conditions did not affect their interest in purchasing distressed properties, 34% indicated that these conditions were negatively influencing their decisions.
Only 21% reported that market conditions made them more inclined to buy homes at auction.
Auction.com highlighted that the supply of properties available for auction has fallen to its lowest level since the third quarter of 2021, during the federal foreclosure moratorium following the pandemic.
Buyer activity has also declined, despite a recent 50-basis-point cut in federal benchmark rates.
Daren Blomquist, vice president of market economics at Auction.com, commented, “The weaker demand from local community developers at auctions suggests ongoing challenges in the retail housing market into early 2025, as these developers are looking six months ahead in terms of market conditions.”
He noted that the purchasing behavior of these developers has historically indicated retail home price trends six to eight months in advance.
The survey revealed that the primary challenge for buyers was higher acquisition costs, identified by 55% of respondents. Other significant concerns included rising rehabilitation costs (49%) and unfavorable mortgage rates (30%).
While mortgage rates have declined recently, the average rate for a 30-year conforming mortgage was 6.65% as of Thursday, which represents a 13-basis-point increase from the previous week.
These rates are similar to those seen in late August but remain lower than the peak of 7.58% in early May.
Political uncertainty was also a factor for about 10% of survey participants, with one buyer stating, “The upcoming election has put everything on hold since I don’t know who will win the White House.”
Overall, the prices buyers were willing to pay at auction relative to estimated after-repair values decreased in Q3 2024 for bank-owned and foreclosure properties.
However, this trend varied by location, with 28 out of 65 metro areas (43%) seeing an increase in the bid-to-value ratio over the past year, particularly in smaller markets like Davenport, Iowa, and Baton Rouge, Louisiana.
In contrast, metros experiencing the largest decreases in average bid-to-value ratios included San Francisco, Akron, Ohio, Portland, Oregon, and Tampa.
The decline in auction demand coincided with limited supply, as reported by Auction.com.
The number of properties presented for foreclosure auction from July to September fell by 2 percentage points compared to the previous quarter, while bank-owned properties increased by 1 percentage point from the prior quarter, which had seen the lowest supply in two years.
Currently, foreclosure supply at auctions is at 44% of pre-pandemic levels from the first quarter of 2020, while bank-owned supply stands at 37%.
However, supply levels vary significantly by location. According to Auction.com, states with the highest foreclosure-auction supply relative to Q1 2020 include Connecticut, Louisiana, Oklahoma, Alaska, and Colorado, all exceeding 90%.
Conversely, Georgia, New Jersey, Florida, Virginia, and Nebraska exhibit the lowest supply rates, each below 30% compared to pre-pandemic levels.
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Also Read: Distress Now Hits A Massive Chicago Apartment Complex
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