US 2008 U.S. Home Sales Largely Driven By Foreclosures

According to data released by real estate data company Radar Logic, there was a 7% increase in home sales in 2008 largely due to foreclosures, after falling around 40% the year before, mainly by buyers looking to buy at the bottom and those lured by low loan rates.

There was an increase of a whopping 177% last year of the so-called "motivated sales," segment, which are essentially foreclosed houses which are sold at auctions or through financial institutions. On the other hand, Radar logic reported that in the 25 metro areas tracked by them, all other sales in the 25 metro areas saw a fall of 17%.

Talking to Reuters, chief executive of Radar Logic, Michael Feder, said that "The market seems to have migrated to the point where motivated sales have become a far more constant part of the housing sales market," He added that the transactions in these distressed properties comprised as much as one third of all sales activity in the previous year.

There has been a massive fall in the real estate market compared to its 2006 record highs, and the market is flooded with unsold homes, which include foreclosed properties as well as new constructions that are empty.

Feder added that "Buyers recognize that those are at significant discounts versus what all other people are asking for homes and are migrating to those first." He feels that this will turn out to be positive for the real estate sector, giving us an indication that a bottom was in place.

The Radar Logic composite index was down by 22% this year on the back of prices falling in all of the 25 metro areas it tracks. Among them Nevada, Arizona, California, and Florida, which showed the largest gains in sales in areas which had the biggest decline in prices.

Up from 23% last year, motivated sales made up 47% of December’s net sales in California, according to Radar Logic’s data. Freddie Mac was offering its 30-year loan rate at a low rate of 5.1% – its lowest since it started keeping track in 1971.

Feder contends that "We get a turnaround in all three of those and I think we’ll have a housing recovery." He added that "We hear anecdotally that there are a lot of deals that are cut, but then buyers can’t get mortgages for more than 60 percent of the purchase prices, even though it’s at this ‘motivated’ price level." According to him, home prices are not likely to go up until the supply imbalance improves.

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