Homeowners Are Thinking Twice Before Walking Away From Their Underwater Mortgages

Foreclosure and bank owned sales fell 18% in the first quarter to 190,121, according to RealtyTrac's latest report.  This is down 22% from Q1 2012.

Foreclosure and short sales accounted for 21% of all residential sales in Q1, down form 25% in Q1 2012, and a peak of 45% in Q1 2009. 

Meanwhile, non-foreclosure short sales were down 10% from Q4 2012, and down 35% from Q1 2012. 

Including non-foreclosure short sales, the share of distressed sales came to 36%.

The decline in foreclosure related sales is in large part because of  a decline in foreclosure activity. But the decline in non-foreclosure short sales was "surprising" according to RaltyTrac vice president Daren Blomquist, given that 11 million homeowners are in negative equity. 

"Rising home prices in many markets are stunting the continued growth of short sales by reducing incentive for both underwater homeowners and lenders.

"Underwater homeowners may be willing to stick it out a few more months or even years in the hope that they will be able to walk away with money at the closing table and without a hit to their credit rating, and for lenders a failed short sale may no longer translate into bigger losses down the road given that average prices of bank-owned homes are rising — at a faster pace than non-distressed home prices in many markets."

Here are some details from the report:

The average price of a foreclosure related sale declined 1% quarter-over-quarter in Q1 to $167,095.At 35% Georgia had the biggest percentage of foreclosure related sales. Meanwhile, in Massachusetts, New York, and New Jersey foreclosure-related sales account for less than 10% of sales.  The average price of a foreclosed home was 30% below the average price of a non-foreclosure property.

Here's a look at foreclosure sales against average foreclosure sale price:

RealtyTrac

Please follow Money Game on Twitter and Facebook.
Follow Mamta Badkar on Twitter.
Ask Mamta A Question » Tags: Foreclosure, U.S. Housing | Get Alerts for these topics »

To embed this post, copy the code below and paste into your website or blog.

View the original article here