Home foreclosure listing prices across the U.S. in the third quarter last year marked a discount averaging 28 percent, based on data from a Seattle-based real estate information provider which studied foreclosure sales in 16 metro areas.
The discount rate was estimated by comparing foreclosure prices to the prices of nondistressed homes for sale. The biggest discount rate was reached in Pittsburgh, where foreclosures were sold at 59 percent below the price levels of non-foreclosures. The lowest discount rate was in Portland, Oregon, where the average discount was 18 percent.
According to economist Stan Humphries, even considering the differences in characteristics of foreclosed homes and non-foreclosed properties in price estimations, foreclosures still were sold for significantly less than non-foreclosed properties.
The other metro areas with substantial discounts in the July-September quarter were Cincinnati in Ohio, with 39 percent; Columbus, Ohio, with 38 percent; and Minneapolis and Saint Paul, with 34 percent.
Phoenix, whose foreclosure sales accounted for 58 percent of all house sales during the quarter, posted an average foreclosure price discount of 29 percent.
Las Vegas, the metro area with the highest percentage of home foreclosure listing sales – 74 percent of all home sales – posted an average price discount of 23 percent, far below the price discount experienced by Pittsburgh, which had fewer foreclosures.
Five metro areas in California, which had high foreclosure percentages, also posted relatively high average price discounts but much lower than those posted by the top four metro areas in price discounts.
Riverside, where foreclosure sales accounted for 66 percent of all home sales, posted an average price discount of 25 percent; Sacramento had a 50-percent foreclosure sale rate, but a 19-percent average price discount.
San Francisco, Los Angeles and San Diego all had 39 percent of their homes sales comprising foreclosure sales, but their average price discounts were 24 percent, 27 percent and 24 percent, respectively.
The data showed that price discounts for foreclosures were not driven by percentages of foreclosure sales. In another report, analysts said that Pittsburgh had a substantial average price discount despite having only a ten-percent foreclosure sales percentage because of lack of competition in its foreclosure market.
The analysts said that banks in Pittsburgh usually release their foreclosures immediately after they repossess them, effectively preventing the bidding wars that occur in places where home foreclosure listing properties are released by lenders to the market strategically to get the best prices.
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