In the years following the housing market collapse, low property values attracted mostly real estate investors, while conventional homebuyers were forced to wait on the sidelines. However, as conditions improve, a growing number of American households are starting to take advantage of these bargain prices.
At the end of the first quarter, real estate data from the Standard & Poor's/Case-Shiller Home Price Index showed that property values fell to the lowest point recorded since the housing crisis began. As the market enters its peak season for activity, this has resulted in an upswing in homebuying. However, some industry experts say that despite the rising transaction rate, it could take a while before prices stabilize.
"Transaction volumes for both new and existing homes have improved somewhat over the past few months, but that doesn't mean that prices will rebound on the same timeline," Peter Boockvar of Miller Tabak, told financial website The Street. "The market has reached the point that low prices themselves are finally driving some better demand again. Prices will eventually follow, but in fits and starts, and it's still very possible that they go lower still."
Foreclosure sales lure buyers
The affordability of distressed properties, including short sales and foreclosures, are especially attractive to conventional buyers and investors alike. In fact, during the first quarter, nearly 26 percent of all home sale transactions were for distressed properties, according to a recent report from RealtyTrac.
At the beginning of 2012, the average price for a foreclosed house or bank-owned property fell 1 percent from the end of 2011 to $161,214. This price point provided a 27 percent discount from the value of non-distressed properties.
"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.
Local markets unloading distressed homes
Meanwhile, the rate of foreclosure sales increased in 21 states, led by Oregon, North Carolina, Ohio, Florida and Wisconsin. However, even though these states posted the most significant increases, distressed-property transactions accounted for nearly 50 percent of all sales in Nevada, California and Georgia.
All three of these states had high level of foreclosure activity after the housing market collapse. This not only had a devastating effect on real estate in these areas, local job markets also suffered. As Nevada, California and Georgia continue to thin their distressed inventories, they could have rebounds soon than expected.