Sales drop on foreclosed homes here

  • Sales of foreclosed homes dropped sharply in 2010, creating a glut of distressed homes that drags down the prices of other properties for sale.

      Sales of foreclosed homes dropped sharply in 2010, creating a glut of distressed homes that drags down the prices of other properties for sale. Bob Chwedyk | Staff Photographer

  • Foreclosed homes stall on mark

    Graphic: Foreclosed homes stall on mark (click image to open)

 
 
Posted2/24/2011 12:15 AM

The sale of foreclosed homes in suburban counties has had double-digit drops in 2010, compared to 2009, indicating a glut of distressed homes stalled on the market, according to a report expected to be released today by RealtyTrac Inc.

But the first six months of this year could see sales pick up for these foreclosed homes, the Irvine, Calif.-based online research firm said.

                                                                                                                                                                                                                       
 

During 2010, Cook, DuPage, and Lake counties saw foreclosed home sales drop in the 20-percent range, while Will County's plunged about 40 percent.

Some major reasons include the end of federal stimulus incentives for first-time homebuyers and the foreclosure document controversy that led some potential buyers to hesitate, said RealtyTrac spokesman Daren Blomquist.

"There is still a high level of inventory of foreclosed homes on the bank books that still haven't sold," said Blomquist. "But we're expecting these sales to pick up during the first half of this year."

But the "wild card" could be how quickly the attorneys general nationwide settle issues involving improper documents of foreclosed homes, especially those involving robo-signing. Other factors include tighter restrictions on getting mortgages and the high rate of unemployment.

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"Eventually, they (bankers) will need to get them off their books," said Blomquist. "Buyers are more cautious even if homes are listed as foreclosure sales. They're more diligent before committing."

RealtyTrac's annual report shows that foreclosed homes accounted for nearly 26 percent of all U.S. residential sales during 2010, down from 29 percent of all sales in 2009. The report also said more than 831,000 such homes had sold to third parties in 2010, a decrease of 31 percent compared to the year before.

In Illinois, 29,194 foreclosed homes sold in 2010, a drop of nearly 22 percent from 2009. The average Illinois foreclosed home sold for $138,395. If it was already bank or real estate owned, then that property had an average discount of 46 percent, RealtyTrac said.

While surrounding counties here showed double-digit decreases, Kane County actually had a 7 percent increase in sales of foreclosed homes, possibly indicating that this area wasn't hit as hard early on, but its foreclosures later accelerated. So it could be in a different selling cycle than other surrounding counties, Blomquist speculated.

                                                                                                                                                                                                                       
 

The ongoing problem of so many foreclosed homes languishing on the market also continues to hurt the sale prices of other nearby homes, Blomquist said.

"The market needs to clear the inventory of these distressed properties in order for the market to truly return to health," said Blomquist.

While RealtyTrac believes sales could increase over the next six months, another expert wasn't as optimistic.

Homeowners continue to struggle and foreclosures will continue to mount here and nationwide. And the servicers, including Bank of America and Wells Fargo, don't have the staffing to handle them all. So the foreclosure crisis is likely to continue for at least the next five years, and the moratorium on whether a home was properly foreclosed will further complicate the system and stall many more sales, said Rebel A. Cole, DePaul University professor of finance and real estate.

"There is no light at the end of this tunnel," Cole said.