Foreclosure Discounts Fail to Woo Buyers

Despite deeper discounts, sales of foreclosed-upon homes declined last quarter while prices of ordinary homes got a lift.
By Lauren LaCapra ,

Updated to include total quarterly sales of foreclosed properties.

NEW YORK (

TheStreet

) - Despite deeper discounts, sales of foreclosed-upon homes declined last quarter while prices of ordinary homes got a lift.

RealtyTrac, which maintains an extensive library of foreclosure data, said Thursday that the average sales price of homes in some stage of foreclosure was more than 32% below comparable properties not in the foreclosure process. That was up from a 26% discount the previous quarter and a 29% discount a year ago.

The average price of foreclosure transactions was $169,523, down 2.5% on a quarterly basis and 0.4% on an annual basis. Meanwhile, properties not in foreclosure saw sales prices jump to $249,721, up 6.4% quarterly and up 4.4% year-over-year.

Still, overall demand was slack. There were were 188,748 sales of foreclosed properties during the quarter, down 25% from the previous period and 30% year-over-year. Sales volume of non-foreclosure properties fell 29% on a quarterly basis and nearly 31% from the third quarter of 2009. RealtyTrac CEO James Saccacio chalked that up to the expiration of the homebuyer tax credit in April.

"Demand for foreclosures also dipped in the third quarter, but those who did purchase a short sale or REO during the quarter were able to get an average discount of more than 32 percent -- the highest average foreclosure discount we've seen since the fourth quarter of 2005," said Saccacio.

'Shadow Inventory' Adds to Housing Decline >>

Saccacio added that the foreclosure scandals that have plagued large servicers like

Bank of America

(BAC) - Get Report

,

JPMorgan Chase

(JPM) - Get Report

,

Wells Fargo

(WFC) - Get Report

and

Citigroup

(C) - Get Report

since early October could add more stress to the housing market.

"The foreclosure-processing controversy, which was brought to light at the very end of the third quarter, could chill demand even further -- particularly for foreclosure properties," Saccacio said. "A quick but responsible resolution to that issue would be ideal to help the market continue to properly clear out foreclosure inventory and get distressed properties into the hands of qualified buyers and investors who will likely add value to those properties and the neighborhoods they are in."

-- Written by Lauren Tara LaCapra in New York

.

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