Interest in Buying Foreclosures Drops

By:
Peter King - MortgageLoan.com

Consumer interest in buying foreclosed properties is declining, even as large numbers of foreclosed homes continue to come onto the market. 

Forty-three percent of U.S. adults said they were at least somewhat likely to consider buying foreclosed home in the near future, according to a consumer survey taken in early November, down from 55 percent in May. However, interest in foreclosures remains strong among certain groups, including real estate investors and current homeowners looking to trade up.
 
The survey showed that consumers appear to have highly optimistic views of the potential savings available in buying foreclosures, with two-thirds saying they would expect a discount of 30 percent or more when buying a foreclosed property. Those in the Northeast expected the biggest discounts, with 43 percent saying they would expect a discount of 50 percent or more.
 
By contrast, the typical discount on a real-estate owned (REO) property sold through real estate listings is 10-20 percent, according to realtors who specialize in foreclosed properties. Greater discounts are often available for those who purchase homes at foreclosure auctions, but involve uncertainties regarding the condition of the home and possible liens on the property.
 

Investment, second home interest strongest

 
According to the survey, the strongest interest in buying foreclosures was among those considering an investment property or second home, with 92 percent saying they would consider a foreclosed property. Nearly one in four adults, 23 percent, said they are at least somewhat likely to buy an investment property or second home in the near future.
 
A similar number, 24 percent, of current homeowners said they were at least somewhat likely to “trade up” to a better home in the near future. Of these, 88 percent said they were at least somewhat likely to consider a foreclosure.
 
Interest among renters was considerably lower but still relatively strong, with 57 percent saying they were at least somewhat likely to consider buying a foreclosed property. Interest was strongest among younger renters, with 65 percent of those aged 35-44 saying they would consider a foreclosure, compared to only 40 percent of those age 55 and older.
 

Willing to invest in repairs

 
Nearly all respondents, 95 percent, said they would be willing to invest in renovations when buying a foreclosed property, with 55 percent saying they would be willing to invest 20 percent of the home purchase price or more.
 
The survey comes at a time when the supply of foreclosures coming on to the market appears to be shrinking, though still ample. According to foreclosure data firm RealtyTrac, total U.S. foreclosure activity fell by 8 percent in November, but was still 15 percent above the November 2009 rate.
 
The November and May consumer attitude surveys were conducted by Harris Interactive for RealtyTrac and the online real estate company Trulia.  
 
 
 

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