REO and Short Sales Make Up Half of California Market in 2009: CAR

Of all homebuyers in California in 2009, 47% were first-time homebuyers, up from 35.9% in 2008, according to a report from the California Association of Realtors (CAR). And while new blood entered the market, REO and short sales made up half of the assets sold in the state.

It’s highest share of the market first-time homebuyers took since 1995. Back in November, President Barack Obama extended the first-time homebuyer tax credit, which was originally set to expire on Dec. 1, 2009 to April 30, 2010. Under the extension, first-time buyers can claim 10% of the purchase price, up to $8,000 for single or married taxpayers filing jointly…

“It is clear that the federal tax credit for home buyers worked well in 2009 and is continuing to drive home sales,” said Steve Goddard, president of CAR. “The home buyers’ tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the economy.”

Of those surveyed by CAR, 40% of the homebuyers said they would not have purchased a home without the credit. Nearly 70% of those surveyed said the credit was either “very important” or “most important” in their decision to buy a home.

REO and short sales took up nearly half of all market activity in 2009, up from 35.6% in 2008, according to the CAR report. As a result, the median sales price of distressed property dropped almost 25% to $250,000 in 2009 – down from $330,000 in 2008.

The California market continues to condense toward FHA-insured loans in 2009. For the year, those loans took up 32% of the market compared to 18.9% in 2008, according to CAR. The rise could have come when the Federal Housing Administration (FHA) raised its cap from $362,790 to $729,750.

According to some, the tax credit isn’t a stimulus, it’s a crutch.

“[T]he housing market is likely to falter once the tax credit expires this spring, leading to a double-dip in prices,” said Paul Dales, the senior US economist at Capital Economics.

An executive of a regional homebuilder in the Southwest told HousingWire, a sister publication, that business will drop once the tax credit expires but expects, and is hopeful for, an extension.

Write to Jon Prior.

Buyers Get 56 Cents on the Dollar at Texas Foreclosure Auctions: FLS

Third-party buyers purchased more than 250 homes in North Texas foreclosure auctions at an average $0.56 on the dollar in Q110, according to Foreclosure Listing Service (FLS).

George Roddy, Sr., president of FLS, said 6% of the residential foreclosure postings that were actually sold at auction were purchased by third-party buyers or investors. While most are investors, he said, there are a number of people looking looking for a good deal on a home they can move into…

Roddy said that many investors hunting for a deal will concentrate on grabbing properties before they hit the auction block in Texas. There is a 21-day period between the filing deadline for the foreclosure notice to be recorded and the day of the foreclosure auction. These investors are negotiating with the property owners, who still have the right to sell the property before it goes to auction.

According to FLS, almost 35% of the homes posted for foreclosure during Q110 were actually auctioned at the courthouse steps. The other 60-70% never made it to auction. Either the owner brought the mortgage curren, renegotiated the terms of the loan or filed for bankruptcy, which places the foreclosure on hold. Some owners made a sale before the auction as well.

“I expect this to be a great year for the investor or home purchaser who is in a financial position to be buying distressed properties at any stage in the foreclosure process,” Roddy said.

Write to Jon Prior.

Another 5m Homes Set to Fall into the Shadow

Over the next two years, 5m homes will drop into the “shadow inventory” of foreclosures as the fragile housing market teeters on the brink of another dip, according to a report from Capital Economics.

Paul Dales, senior US economist with Capital Economics, said as unemployment remains high, more homeowners are likely to foreclose over the next two years…

A recent report from the credit rating agency Standard & Poor’s showed that it would take roughly three years to burn through the already clogged supply of REOs.

Dales added that based on his firm’s models, foreclosures peaked in Q409 and should start to fall. Even though the peak has come and gone, another 2.6m homes will foreclose by the end of 2010, totaling 5m over the next two years.

But Dales warned that these properties may not see the light of day anytime soon.

“To start with, the sheer quantity of delinquent loans has extended the foreclosure timeline. Moreover, there is no incentive for banks to release foreclosed properties if they will destabilize the market,” Dales said. “Nonetheless, at some point this additional supply will be released.”

Write to Jon Prior.