February 28th, 2011 8:41 AM by Lehel S.
Foreclosure sales accounted for 44 percent of all California homes sold last year, the third highest percentage in the country, but also down from a peak of 57 percent in 2009, according to a report released today by Irvine-based RealtyTrac.
According to the report, nationally, foreclosure homes accounted for nearly 26 percent of all residential sales during 2010, down from 29 percent of all sales in 2009 but up from 23 percent of all sales in 2008.
The report also shows that the average sales price of these foreclosure properties was more than 28 percent below the average sales price of properties not in the foreclosure process. That's up from a 27 percent average discount in 2009 and a 22 percent average discount in 2008.
Lower prices would normally be good for first-time home-buyers. But tighter lending standards have kept many from taking advantage of them.
"The cash-rich investors can come in and get foreclosed properties at incredibly favorable prices," said Paul Dales, senior U.S. economist for Capital Economics. "The average Joe can't take advantage because they simply cannot get the credit to buy."
Home sales faced a slowdown in the third and fourth quarter when lenders began to face challenges to their controversial foreclosure methods, according James J. Saccacio, chief executive officer of RealtyTrac.
Despite an early fourth quarter dip, foreclosure sales in California rebounded to account for 45 percent
According to Saccacio, foreclosures will continue to represent a substantial percentage of residential sales and continue to sell at an average sales price that is "significantly below" the average sales price of properties not in foreclosure."
In California, 211,839 foreclosed homes were sold at an average of $251,693, or at 39.3 percent discount from the average regular price of $350,634. While the huge discount is good for buyers, high foreclosure sales, which are dragging down market prices, are not indicative of a good market, Saccacio noted.
"The catch-22 for 2011 is that while accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run," he added. "In the short term, a high percentage of foreclosure sales will continue to weigh down home prices."
The Associated Press contributed to this story.