Homebuyers have generally had a negative attitude toward purchasing distressed properties. However, a recent survey suggests that past stigmas against buying foreclosures may be declining.
In the past, a majority of consumers acquired distressed properties as investment opportunities, according to a recent survey conducted by the National Association of Realtors. Now, an estimated 92 percent of those purchasing foreclosures said they plan to occupy the properties, rather than use them to make a profit.
"We see a combination of factors coming into play explaining the unexpected interest in foreclosures," said Steve Berkowitz, chief executive officer of Move Inc., which operates Realtor.com. "Reductions in supply, expectations that home prices will rise, and changing attitudes toward foreclosures are contributing to the increased demand, especially among owner-occupants."
Specifically, buyer interest in distressed properties has grown roughly 159 percent since October 2009 when the foreclosure crisis began, according to the survey. In addition, 64 percent of respondents said they are highly interested in acquiring a foreclosure. This is a significant increase from when the survey was last conducted a year and a half ago, when only 25.3 percent of prospective buyers shared similar sentiment.
Roughly one in four home sales a foreclosure
As a result of the increased interest in foreclosures, 26 percent of all home sale transactions that occurred during the first quarter were for distressed properties, according to a recent report from RealtyTrac. Real estate data indicates that this accounted for 233,299 sales during the three-month period. This is an increase from 22 percent from the fourth quarter of 2011 and 25 percent a year earlier.
"Foreclosure-related sales picked up in the first quarter, particularly pre-foreclosure sales where a distressed homeowner is selling to avoid foreclosure - typically via short sale," said RealtyTrac CEO Brandon Moore. "Those pre-foreclosure sales hit a three-year high in the first quarter even as the average pre-foreclosure sales price dropped to a record low for our report."
Buyers capitalizing on bargain prices
Homebuyers continue to show interest in distressed properties for their bargain prices. At the beginning of 2012, the average price of foreclosed houses and bank-owned properties was just $161,214. Paired with record-low mortgage rates, entry-level and seasoned buyers alike are capitalizing on these unique opportunities to make the transition to homeownership.