Prices for homes either in foreclosure or sold by banks rose in the second quarter, according to a real estate group, underscoring competition in the market for distressed properties and the degree to which the mortgage crisis has spread to more affluent neighborhoods.
FOR THE RECORD:
Homes in foreclosure: A chart accompanying an article in some editions of the Sept. 30 Business section contained errors in illustrating the rise in the average price of homes sold during or after foreclosure in Southern California, the state and the nation. The chart listed prices for 2009 and 2010 but failed to note that the time frame was the second quarter of each year. The data, credited to Bloomberg, were compiled by RealtyTrac of Irvine. And the numbers presented for 2009 were incorrectly transcribed from RealtyTrac's original data. A corrected version of the chart appears on Page B2 of the Business section. —
In the second quarter, 248,534 U.S. properties were sold by banks or by owners who had fallen into foreclosure, RealtyTrac of Irvine said. That was an increase of 4.9% from the previous quarter, but a 20.1% decline from the same quarter last year, when discounted bank-owned homes flooded the market.
The average price for these properties was $174,198, RealtyTrac said, up 1.6% from the previous quarter and 6.1% from the same quarter last year.
"We are seeing the tail end of the foreclosure crisis caused by bad loans," said Rick Sharga, senior vice president of RealtyTrac. "We are seeing the beginning of the wave of foreclosures caused by unemployment, which means you are seeing, in a lot of cases, a more expensive property in foreclosure than you would see, say, based on a subprime loan."
The price increase was more pronounced in California, according to RealtyTrac. The average price was $256,833 for homes sold by banks or by homeowners who had at least received a notice of default from their lenders. That was an increase of 4.2% from the previous quarter and 17.5% from the same quarter last year.
The sales tracked by RealtyTrac included only properties sold to third parties, either investors or consumers, and not sales of properties sold back to lenders at trustee sales or through other transactions.
Overall home sales during the three-month period captured by the report were boosted by a popular federal tax credit for buyers. Since then, sales of U.S. homes have weakened considerably, and many experts are predicting a decline in home valuations.
"It is tempered a little bit by the fact that it covers the period of the tax credit, and everything looked fine, and since then the market has dropped off," said Gerd-Ulf Krueger, principal economist at Housingecon.com. "We need to watch this a little more and what it shows under the slower market conditions."
Banks have been repossessing homes at a record clip this year, pushing properties through foreclosure that had been delayed by several moratoriums last year as well as the Obama administration's efforts to help troubled borrowers. In recent weeks, the practices of banks taking back homes through foreclosure have increasingly become a concern.
Wall Street titan JPMorgan Chase said Wednesday that it was delaying foreclosure proceedings after it discovered that some employees signed affidavits about loan documents on the basis of file reviews done by other people instead of personally reviewing those files.
The New York bank said it was working with independent counsel to review documents in foreclosure proceedings and has requested that the courts not enter judgments in pending matters until it has completed the review. Those foreclosures only apply to properties in so-called judicial foreclosure states, which require a court order for a foreclosure. The vast majority of foreclosures in California are conducted without a court order.
The JPMorgan Chase foreclosure delay follows a similar move by Ally Financial Inc. last week, when its GMAC Mortgage unit suspended evictions and foreclosures in 23 states while it conducted a review of its processes.
The Detroit company, formerly known as GMAC Inc., didn't suspend evictions in California because almost all foreclosures in the state by it and other lenders don't require a court order. Nevertheless, Atty. Gen. Jerry Brown has told the company to halt foreclosures unless it could prove it was observing the state's laws.