Demand Falls For Purchases Of Foreclosed Homes

Homebuyers interested in purchasing foreclosed or distressed properties dropped in May 2010 compared with the same period last year. Concerns about risks associated with the buying process and the potential for home values declining were among the key reasons homebuyers cited as influencing their negative perception of purchasing a foreclosed or distressed property. See the following article from The Mess That Greenspan Made for more on this.

In this story at the Orange County Register’s Mortgage Insider blog, Marilyn Kalfus provides some shocking data on how potential homebuyers view distressed properties these days.

The public has less interest now in buying foreclosed homes than it did a year ago, a new survey shows, prompting concern about who will buy all the repossessed homes coming on the market and the effect on a housing recovery.

Consumers who would consider purchasing a foreclosure dropped to 45% this month from 55% last May, according to an online Harris Interactive survey conducted for Trulia.com and RealtyTrac.com

The survey showed that among those who cite a downside to buying a foreclosure — and there are actually somewhat fewer than last year: 78% vs 85% – more are worried about the risk and possible loss of value than a year ago:

Rick Sharga, senior vice president of Irvine-based RealtyTrac, a foreclosure website, suggested that potential homebuyers are becoming more realistic about the time and effort it can take to buy a foreclosure at an auction, renovate a foreclosed property or even pull off a short sale.

As someone who is actively shopping for a home (no word back from the bank yet on our short-sale offer) this comes as quite a surprise to me, but, then again, maybe paying cash and looking at the tens of thousands of dollars difference in asking price doesn’t have the same impact as when you’re looking at the more modest difference in monthly payments.

This post has been republished from Tim Iacono's blog, The Mess That Greenspan Made.