Foreclosure Market: Should You Invest now?
The 2009 recession hit the real estate market badly. Thousands of homeowners lost their homes and banks had to deal with empty properties all across the US. In an effort to recover their investment, these foreclosed properties were put up for auction at below-market rates. Smart investors were able to snap up properties quite comfortably.
In fact, large corporations and trusts purchased tracts of property and this gave a huge boost to the real estate market. However, by 2014, large investment groups had purchased most of the foreclosure inventory in the US. Did this mean that there were no more foreclosure properties for small investors and first-time buyers?
No More Foreclosures?
Foreclosed properties are still available says Jeff Adams #1 Real Estate Trainer. The market is slightly different though as several factors are affecting the foreclosure market.
Declining Inventory in Some States, Increased Inventory in Other States
Jeff Adams pointed out that US foreclosure inventory declined by 33.2% from January 2014. Completed foreclosures also declined by 63% from the last 37 weeks. On the other side, he stated that foreclosures would always be present as there would be several reasons for mortgage default. Based on this fact, he stated that there were about 549,000 homes still available for sale, but these homes were caught up in the red tape of foreclosure.
States like Florida, Michigan, Texas, Georgia and California still had several properties in foreclosures and these five states now accounted for almost half of all foreclosed homes in the US. However, states like Alaska, Delaware, North Dakota, Nebraska, Arizona, and Montana had the lowest foreclosure inventory and rates would not increase in these areas.
Zombie Foreclosures are Available
‘Zombie’ foreclosure properties refers to those properties that are stuck in the foreclosure red tape. The homeowner has vacated these properties but the bank has not yet taken over these properties. Almost 25% of foreclosed properties are ‘zombie’ properties and this percentage has increased by 20% in 2014. Cities with the highest number of zombie properties are New York, Miami, Chicago, St. Louis, Portland, and Las Vegas. Jeff Adams states that these properties are perfect for quick purchases if you can locate the homeowner and broker a deal quickly.
Bank Repossessions Are Increasing
According to RealtyTrac, bank repossessions have increased in 2015. However, the average foreclosure rate is still below the average foreclosure rate in 2014. Adams points out that the average sales of these foreclosed properties was still 25% below the market rate. This means that buyers still had a wide choice of foreclosed property available for sale. Areas like Dayton and Ohio posted lower than average job numbers and this could result in a notable increase in foreclosed property in 2015-2016.
Adams states that buyers can still find foreclosed properties all over the US. However, they will have to research the market as much as possible. As the 2015 real estate market improves, investors may start purchasing foreclosed in bulk and this will increase rates and lower inventory.