REO Sales Down as Short Sales Increase

According to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, the proportion REOs sold during April plunged, due to an increase of distressed borrowers turning to short sales as an alternative to foreclosure. 

The survey found that short sales represented the largest portion of the distressed property housing market in April, accounting for 17.9% of all transactions. And as short sales surged, the portion of damaged REO transactions fell to 12.8% in April from 15.4% in March.

In addition, the survey found that first-time home buyers started to desert the housing market in April, ahead of expectations. While first-time buyer participation grew at a rapid rate from January to March, April’s data represented a clear reversal in that trend.

According to the survey, first-time buyers accounted for 43.4% of April’s home purchase transactions, a significant drop from March’s figure of 48.2%. This early departure was unexpected, as these buyers had until the end of April to sign a home purchase contract to qualify for an $8,000 tax credit.

“We were surprised to see the early decline in first-time home buyer participation,” said Thomas Popik, research director for Campbell Surveys. “When the tax credit was expected to expire last November, we saw a peak of first-time home buyers in October. Now, the first-time home buyer peak appears to have occurred not one month, but two months early.”

As first-time buyers began their departure from the housing market in April, existing homeowners picked up the slack. The survey results revealed that these buyers expanded their share of the home purchase market from 33.5% in March to 38.7% in April.

But a National Association of Realtors practitioner survey showed a different story. According to this survey, first-time buyers purchased 49% of homes in April, up from 44% in March. The survey also found that investors accounted for 15% of transactions in April, down from 19% in March, and the remaining sales (36%) were to repeat buyers.