An overall slowdown in distressed sales bodes well for home prices holding their own this winter, according to a new report from Amherst Securities Group.
While values have been rising during the spring and summer, prices generally decline in the winter months as the percentage of foreclosure or short sales increases relative to total sales. (House price indices are expected to follow this seasonal pattern again this winter.)
“However, on a year-over-year basis, we expect this winter’s indices to show increases over last year, as the percentage of distressed sales is down,” according to ASG analysts.
In other words, they are predicting
ASG analysts attribute this price resilience to the declining inventory of foreclosed properties or REO. This inventory has declined to 411,360 units as of June 30, down from 604,000 in the fourth quarter of 2010.
On top of this 32% decline in REO, ASG says there have been other positive trends. While the shadow inventory remains “stubbornly high,” the number of borrowers turning delinquent for the first time has been slowing. At the same time, the success rate of modified loans is improving due to fewer redefaults. “Thus, the number of loans transitioning into early-stage delinquency is steadily declining,” the ASG report says.
