RISMEDIA, May 24, 2010—Trulia.com, smart real estate search to help you make better decisions, and RealtyTrac, a leading online marketplace for foreclosure properties, released the latest results of an ongoing survey tracking home buyers’ attitudes towards foreclosures. The new online survey conducted on their behalf from May 10-12, 2010 by Harris Interactive showed a notable decrease in consumers’ willingness to buy foreclosed properties compared to one year ago. Currently, 45% of U.S. adults age 18 and above are at least somewhat likely to consider purchasing a foreclosed home in the future, compared to the 55% of U.S. adults age 18 and above surveyed online by Harris Interactive between May 1-5, 2009.
Underwater and Walking Away
Only 1% of homeowners with a mortgage say walking away from their home would be their first choice if they were unable to pay their mortgage. If their mortgage were to go “underwater,” 41% would at least consider walking away, while 59% would not consider walking away no matter how much their mortgage was underwater.
“For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble,” said Trulia’s co-founder and CEO Pete Flint. “Combined with decreased consumer interest around purchasing a foreclosure, it may take even longer than anticipated to see true health return to the real estate market.”
The Bank-Owned Discount
Eighteen percent of U.S. adults expect bank-owned homes to offer a realistic price discount of less than 25% off the value of a similar home that was not in foreclosure. However, not all consumers have realistic expectations, with 36% saying they expect to receive a discount of 50% or more when purchasing a bank-owned property. Most consumers (95%) would expect to pay less for a foreclosed home than for a similar home for sale that is not in foreclosure.
Negative Stigma to Buying a Foreclosure
The current survey found lower levels of negative sentiment toward purchasing foreclosed properties than one year ago, with 78% of U.S. adults believing there are downsides to buying foreclosed properties compared to 85% in May 2009. Among those who think there are negative aspects to purchasing a foreclosed home, the top concerns about purchasing a foreclosed property between May 2010 and May 2009 include: hidden costs, a risky process and the fact that the home will lose value.
“Although fewer consumers expressed interest in buying a foreclosed home than a year ago, the actual sales of bank-owned properties (REOs), along with sales of properties in the foreclosure process, continue to increase—accounting for more than 30% of total sales in the first quarter of 2010 according to our data,” said Rick Sharga, senior vice president for RealtyTrac. “We anticipate that there will be an increased number of both REO purchases and short sales throughout the rest of the year as the most active buying segments–first-time home buyers and investors–continue to look for bargains.”
“It appears that potential home buyers are taking a more realistic view of foreclosure purchasing,” Sharga continued. “Buying a foreclosure property still provides an opportunity for dramatic savings on a home, but the time and effort involved in executing a short sale, bidding against other buyers for an REO, or the need to do renovations may be issues for buyers not as focused on getting the best price.”
Renovations and Remodeling
The majority of U.S. adults (92%) said they would be willing to invest in improvements such as renovations and remodeling if they purchased a foreclosed home. Of those consumers who would be willing to invest in improvements, 65% would be willing to invest 20% or less of the purchase price to upgrade the property and make it their own.
Renters are showing strong interest in buying foreclosed properties, with 57% at least somewhat likely to purchase a foreclosed home in the future. In comparison, only 40% of current homeowners would consider buying a foreclosure in the future. Additionally, the likelihood to consider purchasing a foreclosure decreases with age: 65% of renters ages 18-34, 63% of renters between the ages of 35-44, and 54% of renters ages 45-54 are at least somewhat likely to consider purchasing a foreclosure, compared to only 31% of renters 55 years and older.
Uses for Foreclosure Purchase
Among U.S. adults at least somewhat likely to purchase a foreclosed home, 62% said they would use the property for their personal primary residence, 19% said they would use it as a rental investment, 8% said they would use it as a second home or vacation home, and 6% said they would buy and quickly resell (or flip). Renters were more likely to say they would purchase a foreclosed property as a primary personal residence (83%), while more than half of homeowners (51%) said they would purchase a foreclosed property for a use other than a personal primary residence.