Buying a foreclosed home has become a favored strategy among real estate investors. But with foreclosure activity in the US housing market down 24 percent this month, is it still a good idea to buy foreclosures?
Should I Buy a Foreclosed Home? Taking a Look at the Trends
A discounted investment property. Quick renovation to increase its value. Flip it for a profit. The same reasons which may have motivated you to buy a foreclosed home before still apply for the US housing market 2020. For real estate investors who know what they’re doing, the foreclosure market is the ultimate opportunity for real estate investment. And to make the most of this opportunity, you should understand the current foreclosure trends. According to ATTOM Data Solutions, US foreclosure activity has been down month-over-month consecutively. What does this mean for you, as a real estate investor? Let’s take a closer look at the most recent report published to understand the data.
Foreclosure Trends
- 53,007 US properties were filed for foreclosure in August. This is 4 percent more than July, but 24 percent less than a year ago.
- On a national scale, one in every 2,554 US properties went into the foreclosure process during the month of August.
- The states with the worst foreclosure rates were Delaware (one in every 1,106 housing units); New Jersey (one in every 1,192 housing units); Maryland (one in every 1,218 housing units); Illinois (one in every 1,562 housing units); and Florida (one in every 1,633 housing units).
- The states with month-over-month decreases in foreclosure activity include the District of Columbia (49 percent decrease); Alaska (30 percent decrease); Arkansas (29 percent decrease); Arizona (28 percent decrease); and Rhode Island (27 percent decrease).
- 19 sates experienced month-over-month increases in foreclosure activity. These include Georgia (43 percent increase); Louisiana (41 percent increase); Michigan (18 percent increase); Hawaii (13 percent increase); and Ohio (9 percent increase).
- The number of bank repossessions (REO properties) is also down from last year. Lenders repossessed 11,493 homes this month (down 47 percent from a year ago).
- How hard is it to buy a foreclosed home? It depends on how many foreclosures there are to choose from. The only state with an annual increase in bank repossessions for the month of August was Hawaii (up 8 percent).
- A couple of states that experienced the largest decrease in completed foreclosures and bank repossessions are Kansas (92 percent decrease); Mississippi (82 percent decrease); Idaho (80 percent decrease); Wyoming (79 percent decrease); and Utah (79 percent decrease)
What This All Means
These numbers are supporting the major downward trend of foreclosures in the US, which after 10 consecutive months of year-over-year decreases, is a trend expected to carry on in 2020. A decrease in foreclosure activity (which includes reports of default notices, scheduled auctions or bank repossessions) is a good thing. This projects a healthy and recovering housing market.
Of course, there are still local real estate markets across the country where foreclosure activity is moving upward against the national trend, but the general forecast is more stability in the US housing market. Projections vary, but some experts are predicting a slight recession to hit in 2020. But backed by this data on foreclosures and the strong US economy, even if a recession hits, it won’t be close to how bad the 2008 recession was.
With all of this being said, is it good to buy a foreclosed home now?
Related: Here Is How to Buy Foreclosed Homes with No Money
Should You Buy a Foreclosed Home?
Home prices will continue climbing in the US housing market 2020. Based on the latest report released by the National Association of Realtors in August, the price of single-family homes in 91 percent of major metro areas had increased annually in the second quarter of 2019. Prices have been steadily increasing since 2012 when the nation began to show signs of recovery.
Some of the most expensive housing markets were the San Jose-Sunnyvale-Santa Clara metro area in California, with a median single-family home value of $1,330,000. San Francisco-Oakland-Hayward in California follows with $1,050,000 and Urban Honolulu in Hawaii with a $785,500 median price point. Your best chance of finding a more affordable investment property in these real estate markets is if you buy a foreclosure.
The second quarter of 2019 was the eleventh consecutive quarter in which US foreclosure activity was below the pre-recession average of 278,912 properties. But properties being foreclosed in the US are still going through a lengthy process with an average of 716 days for the home to officially be repossessed by the mortgage lender. If you want to buy a foreclosed home, I recommend you hit markets with short foreclosure timelines. As of the most recent data, states with the shortest average foreclosure timelines are Mississippi (195 days); Minnesota (226 days); Virginia (228 days); Alaska (242 days); and Maine (277 days).
Related: Is Buying Foreclosed Homes a Smart Real Estate Investment?
Visit the Mashvisor Property Marketplace to Find the Best Off-Market Properties
There are a lot of pros which tag along when you buy a foreclosed home. But it’s natural to wonder is it bad to buy a foreclosed home, especially if this is your first time. But investing in foreclosures has many benefits when it’s done right. You can invest in your desired neighborhood for a below-market value property, rent it out, and build long-term equity or buy a foreclosed home for low and sell it for a higher price. So when you use the right resources, it can be safe to buy a foreclosed home. One of the best resources for finding foreclosed properties for sale is the Mashvisor Property Marketplace.
Related: Buying Foreclosed Homes to Rent Out: A Step-by-Step Guide
This tool will make it easy to buy a foreclosed home in any real estate market, at any time. Filter through a vast supply of off-market properties including foreclosures, tenant-occupied rentals, and more. You can also analyze a foreclosure’s investment potential. Get full-scale analysis reports on any listing you’re interested in, with accurate return on investment and expense projections. Learn more about how the Marketplace can help you find and buy a foreclosed home by clicking here.