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Fewer US adults would buy foreclosed homes: survey

(Agencies)
Updated: 2008-12-17 09:53

NEW YORK – Fewer US adults would consider buying a foreclosed home now than six months ago, and concerns about foreclosures' risks have risen, according to a survey from real estate search engine Trulia.com and research firm RealtyTrac.

Forty-seven percent of US adults would consider buying a foreclosed home now, compared with 54 percent six months ago, the survey said.

The most recent survey revealed that 80 percent of adults were concerned with the risks involved in buying a foreclosure, such as hidden costs, compared with 69 percent who expressed those concerns 6 months ago.

As a result, more than 75 percent of consumers think they should pay at least a 25 percent discount for a foreclosed home while a third would demand a 50 percent discount, according to the survey.

Whether or not potential buyers are interested in them, the number of foreclosures is rising. And despite the survey results, builders of new homes say foreclosures continue to compete directly with their products.

The US Federal Deposit Insurance Corp and Federal Reserve estimate that banks will foreclose on about 2.25 million US homes this year, more than double the 1 million annual rate before the housing crisis.

Of October's sales, 45 percent were "distressed" -- meaning they were either short sales, where the price is less than the outstanding loan, or foreclosures, said National Association of Realtors spokesman Walter Molony.

The association does not have a comparable year-ago figure because they did not track such sales until recently, but it was probably only a single-digit number, Molony said.

WISHFUL THINKING?

Meritage Homes Corp (MTH.N) spokesman Brent Anderson said he hopes the survey results prove true.

"If this means buyers are less interested in foreclosures and more interested in new homes, I love it!" said Anderson.

But field reports from Meritage, the No. 12 US homebuilder, tell a different story.

Under more normal conditions, foreclosures carry a stigma that makes most potential buyers of new homes avoid them, Anderson said.

Competition from the foreclosure market reared its head when that stigma faded due to publicity around foreclosures' low prices, and it has not abated, Anderson said.

"Clearly, the supply side of the homebuilding world is dominated by the foreclosures that are coming in faster and more furiously than in the past," said Stuart Miller, chief executive officer of No. 2 US builder Lennar Corp (LEN.N), on November 11 at a UBS investor conference.

"For some reason there's a psychology that if it's a foreclosed home it must be a good deal," Miller said.

Any dip in enthusiasm for foreclosures might be part of a broader housing decline, Anderson said. "There are fewer buyers out there than there were 6 months ago, and that's pretty much true across the board."

Harris Interactive conducted the online survey of 2,033 US adults between November 11 and November 13 for Trulia.com and RealtyTrac.