MARKET TRENDS
HOUSING MARKET
Investors More Bearish, But Still Buying Aggressively at Auction VALUE-ADD INVESTING STRATEGY FOR DISTRESSED PROPERTIES NOT HIGHLY DEPENDENT ON RAPID PRICE APPRECIATION
by Daren Blomquist
ore than half of real estate investors in first quarter 2022
M
Which of the following best describes your view of the housing markets where you operate?
described their local housing market as “overvalued with a correction pos- sible,” but nearly nine out of 10 expect their property acquisitions to increase or remain the same this year, accord- ing to an Auction.com buyer survey conducted in March 2022. Another question in the same survey helps shed some light on these seemingly incongruous responses. Although most investors think a price correction is possible at some point in the future, most don’t think that correction will happen in 2022: 17% said they expect flat or declining home price appreciation this year. That is up from 12% a year ago, but it still indicates more than eight in 10 buyers expect home prices will continue to increase in 2022. STRONG DEMAND FOR DISTRESS Buyers like Virginia-based Rick Starnes, who is trying to lock in three more houses to add to the five he’s purchased on Auction.com since 2018, aren’t just talking the talk when it comes to aggressive acquisitions. They are walking the walk as evidenced by key demand and sales metrics from the Auction.com platform. Sixty-one percent of all properties brought to foreclosure auction on
All Buyers
55%
Undervalued with strong upside Soft fundamentals with select opportunities Overvalued with correction possible Fundamentally sound with solid growth
West
62%
South
55%
Northeast
62%
Midwest
57%
Source Auction.com March 2022 buyer survey
the Auction.com platform in the first quarter of 2022 were sold to third- party buyers, up from 56% in the previous quarter and up from 59% a year ago. The first quarter third- party sales rate was not far below the pandemic high of 63% in the second quarter of 2021. A barometer of demand from real estate investors purchasing at the foreclosure auction, the third- party sales rate skyrocketed in the second half of 2020 following the pandemic-triggered foreclosure moratorium on government-backed mortgages. The rate continued to hover near 60% even after the moratorium expired in July 2021 and even as a foreclosure- preventing rule from the Consumer
Financial Protection Bureau expired at the end of 2021. In the five years before the pandemic (2015-2019), the third-party foreclosure sales rate averaged 39%. The near-60 percent rate over the last two years represents a paradigm shift in that rate. Investors aren’t just buying a higher percentage of properties available at foreclosure auction; they’re willing to pay higher prices. The average sales price for properties sold via foreclosure auction on the Auction.com platform in the first quarter of 2022 was $193,597, up 4% from a previous quarter and up 41% from a year ago to a record high as far back as national data is available (Q1 2015).
78 | think realty magazine :: july – august 2022
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