With distressed borrowers increasingly turning to short sales as an alternative to foreclosure, the proportion of damaged foreclosure properties, otherwise known as REO, sold during April plunged, according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions.
The survey found that short sales represented the largest portion of the distressed property housing market in April, accounting for 17.9 percent of all transactions. And as short sales surged, the portion of damaged REO transactions fell to 12.8 percent in April from 15.4 percent in March.
In addition, the survey found that first-time homebuyers started to desert the housing market in April, ahead of expectations. While first-time buyer participation grew at a rapid rate from January to March, April’s data represented a clear reversal in that trend.
According to the survey, first-time buyers accounted for 43.4 percent of April’s home purchase transactions, a significant drop from March’s figure of 48.2 percent. This early departure was unexpected, as these buyers had until the end of April to sign a home purchase contract to qualify for an $8,000 tax credit.
“We were surprised to see the early decline in first-time homebuyer participation,” said Thomas Popik, research director for Campbell Surveys. “When the tax credit was expected to expire last November, we saw a peak of first-time homebuyers in October. Now, the first-time homebuyer peak appears to have occurred not one month, but two months early.”
As first-time buyers began their departure from the housing market in April, existing homeowners picked up the slack. The survey results revealed that these buyers expanded their share of the home purchase market from 33.5 percent in March to 38.7 percent in April.
But a National Association of Realtors practitioner survey showed a different story. According to this survey, first-time buyers purchased 49 percent of homes in April, up from 44 percent in March. The survey also found that investors accounted for 15 percent of transactions in April, down from 19 percent in March, and the remaining sales (36 percent) were to repeat buyers.