Foreclosed homes have become considerably less attractive to consumers, according to a Trulia and RealtyTrac survey released Tuesday.
Only 43% of adults surveyed in November by Harris Interactive said they were somewhat likely to consider buying a foreclosed property. That compares to 55% last May and 69% in May 2008.
Buyers continue to be worried that there may be hidden costs when buying a foreclosed home (69%), that the process is risky (48%), and that the home will continue to fall in value (35%).
Since two of those worries are mostly put to rest when buying a new home, the survey brought good news for home builders who find themselves competing against foreclosed homes.
But it brought some bad news as well, specifically that the people who are most likely to consider buying foreclosed homes are the same people who constitute many builders' best market now--young people looking for a first home.
Among adults between 18 and 34 surveyed and renters surveyed, 57% of each said they would be interested in buying a distressed home in the future. Some 61% of renters between18 and 34 and 65% between 35 and 44 said they were likely to consider buying a foreclosure. Only 40% of renters 50 and older said that.
Buyers looking to move up to a larger home also were interested in foreclosures, with 88% saying they were somewhat likely to consider a foreclosed property.
Nearly one-fourth of those surveyed said they were likely to buy second homes or investment properties and 92% of them said they were somewhat likely to buy a foreclosed property.
Even worse bad news for builders came during the conference call held in the wake of issuing the survey, though it's not really new information for most builders. Foreclosures are going to be competition for builders for some time to come.
"The real story is the number of foreclosures continues to grow and spread," said Pete Flint, CEO of Trulia, a real estate search company in announcing the survey results.
More than 3.2 million households received mortgage delinquency notices this year, and that number is expected to near 4 million next, said Rick Sharga, senior vice president of RealtyTrac.
Roughly 650,000 home owners are in the early phases of the government's loan modification program, and only half or so are expected to succeed with getting their home loans modified so they can keep the houses. The government had hoped to help 4 million owners in trouble.
To make matters worse, unemployment continues to cause even more households to move into default on their mortgages, Flint pointed out.
Along with the states that have traditionally had high rates of foreclosures, Florida, California, Arizona, and Nevada, foreclosure numbers are now climbing in areas where there has been chronic job loss including Provo, Utah; Joliet, Ill.; Boise, Idaho; Portland, Ore.; Fayetteville, Ark.; and Charleston, S.C., said Sharga.
2011 will only be marginally better, added Sharga. "We won't reach normal levels until 2012, and even then there will still be a shadow inventory well into 2013."
The survey did hold a bit of good news for remodeling contractors since 95% of those who said they would consider buying a foreclosed property said they were willing to invest in renovations, with 55% saying they would spend 20% or more of the purchase price for the improvements.
