Buyers lose interest in foreclosed homes: "Shadow Foreclosures"

Buyers lose interest in foreclosed homes: "Shadow Foreclosures"

Buyers lose interest in foreclosed homes: "Shadow Foreclosures"

Source: The Bradenton Herald (Bradenton, Fla.)
Publication date: May 21, 2010

By Duane Marsteller, The Bradenton Herald, Fla.

May 21–MANATEE — Buyer interest in foreclosed homes is waning as a growing number of them are poised to hit the market, a combination that could spell trouble for the U.S. housing market’s recovery, according to survey results released Thursday.

Just 45 percent of those questioned said they would consider buying a foreclosure, down from 55 percent a year ago, according to a national online survey conducted for RealtyTrac and Trulia.com. The most common concerns cited: potential hidden costs, a risky, time-consuming process and fears the home will lose value after the purchase.

“It appears that potential homebuyers are taking a more realistic view of foreclosure purchasing,” said Rick Sharga, RealtyTrac’s senior vice president.

At the same time, lenders are repossessing U.S. homes at a record rate: 918,000 last year and another 258,000 in the first three months of 2010, according to RealtyTrac, a foreclosure listing service. Only about 30 percent of those properties are on the market.

The remaining “shadow inventory” has stoked fears that lenders will swamp the market with foreclosures, further depressing prices. But Sharga said lenders have been managing that inventory “in an orderly, measured manner” and are unlikely to suddenly open the spigot.

“We’re not going to see a flood,” he said during a conference call with reporters. “We’re going from a trickle to a steady stream.” DinSFLAno-no we are going to see a TSUNAMI!

But both he and Pete Flint, Trulia.com’s co-founder and chief executive, said home prices likely won’t rise much in the next year as a result. That means the U.S. housing market won’t return to normal until 2013 and much later in harder-hit markets, including Sarasota-Bradenton.

The Manatee Association of Realtors’ president said she wasn’t surprised that interest in foreclosures has diminished, but she said it remains strong locally.

“A year ago, the market was just picking up and everybody wanted a deal,” said Cindy Greco, of Wagner Realty. “Now there’s a greater awareness that foreclosed properties aren’t a walk in the park … but they’re still attractive to investors and savvy buyers.”

She said sellers who aren’t facing foreclosure also have become more realistic in their asking prices, thus making foreclosed properties less appealing to buyers.

The survey also found that four in 10 homeowners would consider intentionally defaulting on their mortgages if their homes are “underwater,” or worth less than what’s owed on them.

It’s the first time the semi-annual survey, first conducted in May 2008, asked that question. But Flint said he suspects more will be willing to consider walking away as the stigma of foreclosure lessens.

Sharga said that willingness is higher in markets with a larger proportion of condominium units and ones that saw overbuilding, rapidly escalating prices and heavy speculation during the housing boom — all characteristics of the Sarasota-Bradenton market.

“I think there is a lot of visceral anger at the banks right now” on the part of homeowners, he said, especially those who feel banks are stonewalling their efforts to avoid foreclosure. “If lenders had the appearance of being more willing to work with homeowners, there would be fewer people willing to walk away.”

Harris Interactive questioned 2,956 U.S. adults aged 18 and older for the survey May 10-12.

Duane Marsteller, transportation/growth and development reporter, can be reached at 745-7080, ext. 2630.

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To see more of The Bradenton Herald or to subscribe to the newspaper, go to http://www.bradenton.com.

Copyright (c) 2010, The Bradenton Herald, Fla.

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