Metro-Area Foreclosure Sales Tripled in First 10 Months of 2008

By Bob Ivry

Jan. 6 (Bloomberg) -- Foreclosure sales in the 25 largest U.S. metropolitan areas almost tripled in the first 10 months of last year as rising unemployment and falling home values made it tougher for homeowners to sell or refinance their mortgages.

Motivated sales, which include foreclosure auctions and banks selling homes taken over for non-payment, increased 193 percent from January to October 2008 from a year earlier, New York-based real estate data company Radar Logic Inc. said today in a report. Conventional sales rose 6 percent in that period.

“Lenders are motivated to sell foreclosed houses as quickly as possible to get as much of the loan recovered as possible,” Radar Logic Chief Executive Officer Michael Feder said in an interview. “They have a tendency to accept deeper discounts relative to other sales, to the point where motivated sales are driving the market.”

Home prices fell in 24 of 25 U.S. metropolitan areas in October, Radar Logic said, as unemployment hit a 15-year high in November. Almost half the homeowners who bought in 2006 now owe more on their mortgages than their houses are worth, making it difficult for them to refinance without bringing cash to the closing, according to Seattle-based real estate data company Zillow.com.

Forty-one percent of October home sales in Los Angeles and Phoenix were foreclosure auctions or financial firms trying to recoup lost loan value, Radar Logic said.

RPX Report

U.S. foreclosure filings increased 71 percent in the third quarter from a year earlier to the highest on record, according to RealtyTrac Inc., a Irvine, California-based provider of default data.

The RPX Monthly Housing Market Report, published by Radar Logic, measures home values using price per square foot. The data reflects 28-day aggregated values, the company said.

California was home to five of the seven steepest metro area home-price declines in October from a year earlier, Radar Logic said. San Francisco, with a loss of 34.4 percent, was followed by Las Vegas, Phoenix, Sacramento, Los Angeles, San Diego and San Jose.

Milwaukee, with a gain of 5.3 percent compared with October 2007, was the only region where values increased.

Prices are the basis for property derivatives traded on the Residential Property Index with a volume of almost $3 billion, Feder said. The index allows investors to benefit from the movement of metro area home prices without owning land or physical property.

Investors are betting that home prices will continue to decline nationally through 2010, Radar Logic said. Prices will stabilize in Los Angeles and Phoenix in 2010, while values will fall further in Miami and New York, the data company said.

“What the forward contracts are saying is we’re expecting further pain in New York due to further pain in the financial services industry,” Feder said.

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.