Second-Half 2023 Home Price Correction Risk Based on Foreclosure Auction Bidding Behavior in Q2 2023
High High
Moderate Moderate
Low
Minimal Minimal
Metro Area / Risk Atlanta-Sandy Springs-Roswell, GA Moderate
102%
39.2%
29%
2%
Q1 2023 Foreclosure Auction Discount B.. Q1 2023 Foreclosure Auction Discount Below After-Repair Value
Four-Year Change in Discount Four-Year Change in Discount
Q2 2023 Foreclosure Auction Volume - Pct .. Q2 2023 Foreclosure Auction Volume Pct of 2019 Level
Sales Rate: Pct of Pre-Pandemic Sales Rate: Pct of Pre- Pandemic
© 2023 Mapbox © OpenStreetMap
Q2 2023 Foreclosure Auction Volume - Pct of 2019 Level 13% 100% 200%
300%
400%
500%
the first half of 2023, but they were still at a relatively low 20.6% in the second quarter. Those low flipping returns were driven by a combination of compressed purchase discounts and thinner resale premiums. Homes flipped in the second quarter were purchased at an average of 90% of estimated after-repair value, well above the 75% rule cited by Morgan, and resold for 108% of after-repair value. By comparison, second quarter home flips of properties originally purchased while in foreclosure were acquired for an average of 79% of estimated after-repair value and resold for an average of 104% of after-repair value. That resulted in a gross flipping return of 41.9%. Gross flipping returns for renovated dis - tress dropped as low as 30.2% in the fourth quarter of 2022, but that was still nearly double the overall flipping returns for that same quarter.
The resiliency of returns for distressed property investors also stems from the stronger demand in the lower-priced segments of the housing market. “I can sell a $250,000 property all day long,” said Tritt, the Atlanta-area investor. “So, I can be a little bit more aggressive.” LOCAL MARKET DEMAND Tritt operates in the Atlanta area, one market where investors have become more confident in the last six months, based on bidding behavior on Auction.com. Home price correction risk was moderate based on bidding behavior in the second quarter, down from high risk in the first quarter. “This year we started out a little hesitant, a little stutter stepping,” Tritt said, noting that he is particularly confident in the lower price point he sells at. “If I put a 250,000 renovated
home on the market, I still have more people who want to buy it. … As long as that is the case, that is going to keep that price at 250,000.” Other major markets where inves- tors have become more confidently bullish, lowering the risk of a home price correction, include New York, Houston, Philadelphia, Las Vegas, and Pittsburgh. But risk of a home price correction did not decrease in all markets. Major markets where the risk increased based on bidding behavior between the first quarter and second quarter included Washington, D.C.; St. Louis, Missouri; Virginia Beach, Virginia; Minneapolis, Minnesota; and Columbus, Ohio. •
Daren Blomquist is vice president of market economics at Auction.com. In this role, Blomquist analyzes and fore- casts complex macro and
microeconomic data trends within the marketplace and industry to provide value to both buyers and sellers using the Auction.com platform.
thinkrealty . com | 49
Made with FlippingBook Online newsletter