Even discounted homes don't sell. Two charts at the bottom of the story.
The worst summer for home sales in decades also put a chill on foreclosure sales, even as the average discounts on the distressed properties got bigger compared with other types of homes.
Foreclosure sales plunged 25 percent in the July-September quarter versus the April-June period and tumbled 31 percent from the third quarter last year, foreclosure listing firm RealtyTrac Inc. said Thursday.
Sales of non-foreclosed properties fell 29 percent sequentially and nearly 31 percent from the third quarter last year, the firm said.
The decline in sales of bank-owned properties and other homes in some stage of foreclosure is in line with an overall housing market slowdown that took hold after federal homebuyer tax credits expired in April.
The fallout over foreclosure processing errors that prompted some lenders to temporarily halt sales of bank-owned homes wasn't a significant factor in the sharp third-quarter drop in foreclosure sales, said Daren Blomquist, a RealtyTrac spokesman.
"We could expect probably in the fourth quarter to see that percentage of foreclosure sales dip because buyers are a bit skittish about purchasing foreclosure properties, given the questions surrounding the foreclosure process," Blomquist said.
Already, the firm has seen a decline in foreclosure activity in November, which suggests a holdover effect from the foreclosure documents mess. That could mean fewer home sales in the final months of the year — already a traditionally slow period.
In all, 188,748 U.S. homes in some stage of foreclosure were sold in the July-September period, accounting for a quarter of all U.S. residential property sales, RealtyTrac said.
The firm used data from sales deeds filed with county recorder offices. The transactions include sales of newly built homes and previously occupied properties. Foreclosure sales include homes sold by banks and short sales — when the homeowner and the bank agree to sell the property for less than what is owned on the mortgage.
As a share of overall home sales, foreclosure sales rose slightly from the second quarter. They peaked at 37 percent of all sales in the first quarter of 2009, but have ranged between 25 percent and 30 percent this year, Blomquist said.
One key driver is the quantity of foreclosed properties on the market.
In 2005, as the housing boom roared, foreclosure sales accounted for just 1 percent of all sales.
This year, even before the foreclosure documents snag erupted, the foreclosure process began to slow as lenders stepped up attempts to modify loans. Lenders also appear to be managing their stock of repossessed homes, not wanting to flood the market with too many properties.