Trends

Notable trends during early 2011:

• An increase in the percentage of homes selling to cash buyers and
• investors and an associated decline in the number of first-time
• and repeat mortgage buyers

• Market share of distressed/REO homes as a percent of existing
• home sales is on the rise

• A boost in the volume of homes selling vs. prior months and same
• months last year

• Declines in home values continued through end of 2010 and
• January 2011. Results from the most recent WWM Auction Index ™
• indicate some moderation in price declines.

Investors and all cash sales are driving the market:

Since November 2009, the share of existing homes bought by cash buyers and investors has risen to 55% from 31% while the first-time buyers share has fallen to 29% from 51%, (chart):¹

Distressed properties now account for close to half of all existing home sales:

The percent of total homes sales that are distressed properties is on the rise. According to the National Association of Realtors 39% of existing home sales in February were distressed properties. This is the highest proportion in 12 months, climbing from 37% in January and 36% in December. ¹

The HousingPulse Tracking Survey; a monthly survey of 3,000 real estate agents nationwide, puts the share of distressed property sales at 49.6%. January’s numbers continue a trend, climbing from 47.2% in December and 44.5% in November. In some states the share of market is much higher. In California 66% of home sales are distressed properties, while in Florida the market share is 63%. Across Arizona and Nevada distressed property transactions represent 72% of home sales. ²

Even at the increased rate, sales are not keeping pace with the influx of inventory. According to Lender Processing Services, foreclosure starts outnumbered sales 3 to 1 in January. Lenders initiated 230,000 foreclosure actions while foreclosure sales totaled approximately 80,000.³

The increase in distressed properties, combined with the reduction in first-time home buyers is causing downward pressure to build in the market. Over the past 12 months, time on market for the REO categories has strongly increased while the average number of offers has decreased.²

Decline in home prices showing signs of moderation:

Home prices during late 2010 and January of 2011 continue to show steep year to year declines. The national median price for existing homes in January 2011 was down 3.7% from January 2010.1 Clear Capital data recorded a 1.4% decline in home prices over the three-month period ending in February when compared to the previous three months, which is an improvement from the 3.9% quarterly decline reported in December. ⁴

Sources:

1) National Association of Realtors-March 2011
2) Campbell/Inside Mortgage Finance HousingPulse Tracking Survey-Jan 2011
3) LPS January Mortgage Monitor Report-Jan 2011
4) Clear Capital Home Data Index-March 2011