Auction.com: Demand for Distressed Properties May Be Starting to Slow
(Image courtesy of Auction.com; Breakout image courtesy of Brett Sayles/pexels.com)
Auction.com, Irvine, Calif., released its Q2 2024 Auction Market Dispatch, finding that demand for distressed properties sold at auction started to slip in June.
“The demand slippage in late Q2 could be an early indication that local community developers buying at auction are becoming increasingly wary of rising retail inventory, which represents competition for the renovated homes they sell or rent back into the retail market — typically within six months of buying at auction,” said Daren Blomquist, Vice President of Market Economics at Auction.com and author of the report. “If the demand pullback continues into Q3, it would also foreshadow a slowdown in retail home price appreciation.”
The average number of bidders for each property sold at a bank-owned (REO) auction in the second quarter was down 2% from Q1, but up 3% from a year ago. That doesn’t tell the whole story, Auction.com cautioned–June bidders-per-property were down 17% month-over-month and down 3% year-over-year.
The sales rate at foreclosure auction was up 5% for the quarter and 4% annually but decreased 4% in June from a more than two-year high in May. That rate was still up 3% year-over-year.
Winning bidders at foreclosure auction in June were willing to pay 58.7% of a property’s estimated after-repair value on average, down from the 25-month high of 60.7% in April.
Winning bidders at an REO auction in June would pay 58.6% of a property’s estimated after-repair value on average, down from a 25-month high of 61.7% in April.
The number of properties brought to foreclosure auction was less than half (at 46%) of the pre-pandemic level in Q1 2020, down from 49% in Q1 and down 57% year-over-year.
The number of properties at REO auction was at 36% of Q1 2020, down from 38% in Q1 and 40% in Q2 2023.
The bid-ask spread between what bidders are willing to pay and what sellers are willing to accept stayed fairly flat overall through the quarter, but widened in June.
For foreclosure auction in the quarter, it was 4 percentage points–up a bit from 3 points in Q1 and year-over-year. For REO auctions it was 10 percentage points, flat from Q1 and down from 11 points year-over-year.
In contrast, in June, the bid-ask spread for foreclosure auctions was 6 percentage points–a 16 month high. The bid-ask spread for REO auctions was 11 percentage points, up from a 25-month low of 8 points in April.
