auction network, The largest online platform for distressed property sales in the U.S. recently reported that demand for auction homes began to decline toward the end of the second quarter of 2024, even as the available supply of foreclosed homes also contracted.
The California-based company’s proprietary data shows rising inventory levels in the retail market are driving the trend. Data comes from altos research corp. It was found that the inventory of single-family homes for sale at the end of July increased by 40% year-over-year.
“The slump in demand at the end of the second quarter may be an early sign that developers in local communities who buy at auction are increasingly wary of growing retail inventory, representing renovated homes they are selling or leasing back in the retail market. competition – typically within six months of an auction. “If the pullback in demand continues into the third quarter, it will also signal a slowdown in retail house price appreciation. “
This statement is supported by first american Data released this week showed real house prices, adjusted for income levels and mortgage rates, fell 1.3% from May to June. On an annualized basis, prices in five major U.S. markets (Raleigh, Austin, Portland, Ore., Tampa, and Denver) fell between 2% and 7% in June.
Auction.com noted that while “one month’s worth of data is not yet a trend,” the bidding behavior of foreclosure auction buyers tends to be a reliable indicator of future retail home price appreciation, as these investors are estimating market conditions over the next three years. months.
Its data showed overall demand from auction buyers increased between the first and second quarters of 2024, but there was a “significant decline” in June as fewer property bids were offered, sales rates and prices The ratio is also lower.
For example, the average number of bids on properties sold through lender-owned (REO) auctions (which involve assets not sold through foreclosure) fell 17% month-over-month and 3% year-over-year in June. After reaching a two-year high in May, the foreclosure sales rate, or the proportion of properties sold, fell 4% in June.
Meanwhile, bid-to-bid ratios for both types of auctions fell from May’s two-year high. Winning bids at June foreclosure auctions dropped to an average of 58.7% of the property’s estimated after-repair value (ARV), while winning bids at REO auctions averaged 58.6% of the ARV.
In major markets such as Miami, New Orleans, Tampa, Orlando and Denver, the bid-to-value ratio at foreclosure auctions is declining by at least 10% monthly and annually. Auction.com points out that these metro areas tend to have a high proportion of “stale” listings, which have been on the market for more than 30 days. redfin tuna data.
Lower demand levels are also reflected in the bid-ask spread, which is the price buyers are willing to pay versus what sellers are willing to accept. In June, the average gap rose to 6 percentage points for foreclosure auctions and 11 percentage points for REO auctions.
“The wider bid-ask spread in June was not the result of increased pricing by sellers, which are primarily banks, non-banks, mortgage servicers and government-sponsored entities,” Auction.com explained in the report. “Instead, the wider bid-ask spread was primarily a result of higher pricing “This is as a result of the significant drop in prices demanded by buyers between the beginning of the April quarter and the end of the June quarter.”
The supply of homes taking part in both types of auctions is declining and is now less than half of pre-pandemic levels, according to Auction.com. This is related to the recent core logic Data shows that the U.S. foreclosure rate is near a 25-year low.
But the lack of supply varies by location, with some states led by Connecticut, Alaska and Kentucky having more homes available in the second quarter of 2024 than in the first quarter of 2020 when the COVID-19 pandemic began. Being sold at a foreclosure sale. By contrast, states such as Florida, Rhode Island and Nebraska have less than a quarter of their pre-pandemic supply.
