Distressed properties have seen stout demand at auction over the first half of the year, but early signs of weakness are rearing their heads in June, perhaps foreshadowing a continued slippage in the retail housing market.
That’s according to Auction.com’s Q2 2024 Auction Market Dispatch report, which revealed that strong figures in April and May buoyed overall auction demand metrics in the second quarter compared to one quarter prior. The sales rate at foreclosure auction, for example, rose to its highest level in 25 months in May, up 5% quarter over quarter and 4% year over year.
June, however, saw many of those demand metrics take a step back. June’s sales rate, while still up 3% annually, was a backtrack of 4% from May. Other metrics followed similar patterns. Bidders per property in June fell 17% from May and 3% from June 2023. Pricing slipped, too: Winning bidders at June foreclosure auctions, on average, were willing to pay 58.7% of a property’s estimated after-repair value. That’s down from April’s 25-month high of 60.7%. Along the same lines, winning REO auction bidders were willing to pay 58.6% of after-repair value on average, down from April’s recent peak of 61.7%.
June’s backtrack in metrics comes even as the supply of available properties at auction retreated in Q2. The number of properties brought to foreclosure auction from April through June was just 46% of pre-pandemic levels, down from 49% in the preceding three-month period and from 57% year over year.
If the trend of softening endures past June, it could foreshadow a further slowdown in home price appreciation on the retail market. According to Auction.com, the bidding behavior of buyers at distressed market auctions provides a dependable forward-looking indicator of retail housing market trends, because those buyers are anticipating retail conditions three to six months into the future.
“I do feel like the retail market has softened,” said foreclosure auction buyer Tony Tritt. “I would expect a longer time horizon to get (my renovated properties) sold because they aren’t flying off the shelves like they used to.”
