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Report: Investment Buyers Strengthen Foreclosed Home Sales

While home sales have slowed from the typical pace seen at the start of the spring buying season, the foreclosure market is performing better than the market for all other homes, according to the RPX Housing Market Report from Radar Logic Incorporated, a real estate data and analytics company based in New York.

So far this year, the motivated transaction count within the firm’s RPX Composite, which assesses sales of foreclosed homes by financial firms and at foreclosure auctions, increased just slightly less than its average gain for the period over the last four years.

All other sales, on the other hand, increased by less than half as much as they usually do during the period.

Radar Logic credits investment buyers for these latest findings.

“Investment buyers are driving sales of foreclosed homes, but they have largely ignored the rest of the market,” said Quinn Eddins, director of research at Radar Logic.

“On average, foreclosed homes are priced at a 39 percent discount to other homes,” Eddins said. “Investors believe they can purchase these properties at a significant discount to their future value. Sellers in the rest of the market have not lowered their prices to levels where investors feel confident they can make an adequate return on their investment.”

Eddins explained that non-investment buyers are not as active this year.

“Widespread negative equity is reducing demand as it makes it difficult for would-be move-up buyers to sell their current homes,” he said. “And buyers in general are wary of making a down payment of 20 or 25 percent in an environment where home prices are widely expected to fall over the next 12 to 24 months.”

The report also revealed that home prices increased less than usual this spring.

The RPX Composite price measures home prices in 25 major U.S. metropolitan areas. So far in 2011, the RPX Composite has increased just 0.5 percent.

The weak performance of the RPX Composite price is consistent with the fact that, unlike most years, the market for foreclosed homes is the segment of the housing market with the strongest sales growth, according to Radar Logic.

Source: DSNews