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Are you working with investors? You should be… Study Uncovers Declines Among Owner-Occupant REO Buyers

December 5, 2011

Study Uncovers Declines Among Owner-Occupant REO Buyers

12/02/2011 By: Carrie Bay

Looking for an REO buyer? It’s becoming harder to find owner-occupants to fit that bill.

New Vista Asset Management has published the results of a three-year study on buyers of foreclosed homes, covering 18 counties hit hardest by the mortgage crisis.

The company says the percentage of REO homes sold to owner-occupant buyers has decreased in almost every market.

In Los Angeles County, California, for example, owner-occupant REO buyers have dropped from 80 percent in 2009 to 60 percent by the third quarter of 2011.

New Vista’s study uses data extracted from local recorder, courthouse, and tax assessment records – looking at foreclosed homes sold by banks, HUD, Fannie Mae, and Freddie Mac – to determine whether the purchasers were owner-occupants or absentee owners using single-family homes as rental or vacation properties.

The company began tracking real estate sales transactions closed in the first quarter of 2009 and includes consecutive quarterly data through the third quarter of 2011.

“Although, quarter-by-quarter, we have observed some market-specific increases, over the entire period, owner occupancy rates for REO sales have broadly weakened,” said Brian Hurley, New Vista’s president and COO.

Hurley notes that with eleven consecutive quarters of data, the company can look beyond both seasonality and the temporary impact of demand stimuli such as the homebuyer tax credit, and observe “a clear pattern of decline.”

Wayne County, Michigan is the only market of the 18 analyzed that has seen the percentage of owner-occupant REO buyers increase over the last three years, albeit from extremely low levels.

In 2009, owner-occupants accounted for nearly 33 percent of REO purchases in Wayne County. By the third quarter of this year, their share had risen to just over 37 percent.

Wayne County was the only market that had an owner occupancy rate for single-family REO sales below 50 percent in 2009.

By the third quarter of 2011, owner occupancy rates for REO sales in an additional four of the studied counties had fallen below 50 percent, including Maricopa County, Arizona; Osceola County, Florida; Miami-Dade County, Florida; and Clark County, Nevada.

Most markets included in the study saw their share of owner-occupant REO buyers drop by double-digits over the three-year period.

Kevin Stein is with the California Reinvestment Coalition, a nonprofit organization that advocates for increased access to credit on behalf of California’s low-income communities.

Commenting on New Vista’s results, Stein said, “We are troubled by the significant drop in owner occupant purchases of REO properties in these hard hit markets, which is no doubt compounded by decreased access to credit and a failure to repair foreclosed properties to move-in condition.”

Stein says the increased investor acquisition of REOs is reversing the years of community development progress that nonprofits have facilitated.

“We need to ensure that lenders, nonprofits and government agencies are working together to give qualified homebuyers a fair chance to purchase REO properties and help stabilize residential neighborhoods,” Stein added.

While New Vista has been tracking the study’s findings since the first quarter of 2009, company management elected to formally publish the index in response to a growing focus on investor-driven solutions to the nation’s residential real estate crisis.

“Several initiatives now under consideration promise to channel more houses to investors rather than to owner-occupant purchasers,” Hurley noted.

“We timed the first release of our study to raise awareness of the community impacts that current REO disposition practices are already having,” he explained.

Hurley says bulk sales, drop-bid foreclosure auctions, and proposals under review by the Federal Housing Finance Agency (FHFA) to facilitate the sale of government-owned REOs for rental purposes all promise to move more REOs out of local real estate markets.

“Before the market adopts new strategies to address an expected surge in foreclosure volumes, we wanted the owner-occupancy impact of current approaches to be well understood,” Hurley said.

New Vista’s “Index of the Percentage of Single Family REO Properties Sold to Owner-Occupant Buyers” will now be published quarterly.

The company plans to increase coverage to include additional markets in 2012.

From: http://ping.fm/YmY4M

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