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Foreclosed Home Sales Increased to 5.36 Million

19th May 2011
By karen in Real Estate Law
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The real estate scenario is in a worrisome state. Foreclosures are high. In January, many people bought homes that had been occupied by others earlier. Investors are making all cash purchases. The number of buyers who bought homes for the first time came down.

On the other hand, homes that were previously occupied sold in larger numbers. Home prices dipped to the 9-year lowest figure. That is not a good sign. Economists observe that the housing sector may take a while to recover.

Home sales increased to 5.36 million. This was revealed by the National Association of Realtors. That represents an increase of 2.7 per cent from the number in December – 5.22 million. The pace is far less than what the economists say is a healthy number. They say that sale of 6 million is definitely a healthy number.

The first time buyers have dipped to 29%. This is the lowest in the last 2 years. In 2009, the government had come up with a tax incentive for first time buyers. That encouraged people to buy but home purchases again dipped when the tax incentive expired.

It may be pointed out that foreclosures made up for 37% of sales. Also cash transactions made up for 32% of sales. This is at least twice of what it was in 2009. In Miami and Las Vegas, 50% of sales are in cash. Investors who make cash deals pick up properties that are in risk of foreclosure.

That pulls down prices as investors normally pay very little. Banks who wish to get these properties off their record books do not mind either. This was revealed by economist Paul Dales. Dales said, “The cash-rich investors can come in and get foreclosed properties at incredibly favorable prices. The average Joe can't take advantage because they simply cannot get the credit to buy”.

The large stock of foreclosed homes in the market has pushed down home prices. In fact, the average home price last month was $158,800. When compared to the previous year, that was a decline of 3.7%. When compared to 2002, it had hit the lowest point.

Another economist Steven Wood says that home prices will suffer for a long time. Recovery will not happen since there is a large stock of foreclosed properties in the market. Economists observe that the situation will improve only when there is improvement in employment scenario and not till then.

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