Investors in distressed properties were more upbeat following Donald Trump’s election win even as tough market conditions continued and the supply of homes at auction fell to a three-year low to end last year, Auction.com reported on Monday.
Demand for foreclosed and bank-owned homes was “decisively turning a corner” in December after dipping prior to the election, the company said in its fourth-quarter report.
In early January, Auction.com, a distressed real estate marketplace, polled 145 people who previously purchased properties at auction.
Some 43% of the past buyers indicated the election results increased their willingness to buy, whereas just 3% said it left them more pessimistic. The remaining 54% said the election had no impact on their willingness to buy.
“We didn’t ask the why, but my interpretation would be that it has to do with certainty in the market and investors like certainty,” said Daren Blomquist, vice president of market economics at Auction.com in an interview on Monday.
“In talking to some of our buyers, that’s what I get from them,” Blomquist said.
Blomquist said market conditions remain “a headwind” for investors, citing the National Association of Realtors report last week that existing home sales were at near a 30-year low. He also noted high mortgage rates and a lack of inventory as obstacles for investors.
In the final quarter, inventories of foreclosed properties were 43% below the pre-pandemic level and the lowest level since the third quarter of 2021 when a national moratorium on foreclosures was in place on government-guaranteed mortgages, Auction.com reported.
Low inventories, however, are increasing the sales rate of foreclosed properties at auction. That rate stood at 51% at the end of the year, which is a strong number by historic averages, Blomquist said.
The sales rate refers to the percentage of foreclosed homes put up for auction that ultimately sell. Between 2015-2019, the sales rate was around 40%, he noted.
Demand for foreclosed properties was the highest in Providence, Rhode Island; Washington, D.C.; and the Ohio cities of Dayton, Akron and Youngstown.
Markets with the lowest levels of demand were Minneapolis-St. Paul; Pittsburgh; Wichita, Kansas; San Francisco; and Jackson, Mississippi.
The average price buyers were willing to pay as a percentage of the estimated after-repair value of the properties also increased in November and December, the company said.
“Even though there’s a lot of headwinds in the market, our buyers are still buying a lot because there’s not a lot of inventory,” Blomquist said.
