Lisa Simpson
Jun 1,2010
In: Foreclosures

Foreclosed Homes are no Longer Attracting Buyers

Foreclosed homes are no longer attracting buyers. A large number of foreclosed homes are supposed to be offloaded. Yet that has not stirred the buyers. That could mean trouble for the real estate market, which is trying to recover.

According to a recently conducted survey, only 45 per cent of the people evinced interest in foreclosed property. About a year ago, the number was 55 per cent. The reasons for the waning interest are varied: people feel that it is risky. They also fear that the process is a time-consuming one. There is also fear that the home may lose value over the years.

Rick Sharga, a senior official of RealtyTrac, says, ““It appears that potential homebuyers are taking a more realistic view of foreclosure purchasing.”

Where repossession of homes is concerned, lenders are doing a good job. Banks have recovered 918,000 homes in ’09 and 258,000 in’10. A mere 30 per cent of these homes are in the market.

This “shadow inventory” has sparked fears that home prices could plummet further once foreclosed properties flood the market further. Sharga is, however, confident that banks are managing the foreclosures “in an orderly, measured manner.” They will never open the floodgates suddenly.

Sharga said, “We’re not going to see a flood. We’re going from a trickle to a steady stream.”

Experts say that house prices will not increase even in 2011. That would mean that the housing market will not be on the recovery track till 2013. Cindy Greco, an employee of Wagner Realty, says, “A year ago, the market was just picking up and everybody wanted a deal. 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.”

Cindy says that homeowners whose properties are not facing foreclosure are also realistic. They are not asking for a very high price. That has made foreclosures unattractive to buyers. Another problem plaguing the market is that of underwater homes. Sometimes a property’s value dips so much that owners find they owe more on these homes than what they are worth. Hence, they find it better to walk out of the homes in order to preserve their credit scores.

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