32 PERCENT OF DISTRESSED PROPERTY BUYERS EXPECT HOME PRICES TO DECLINE IN 2023
Buyers still aggressive on acquisitions but shifting toward hold-for-rent strategy
77 percent of buyers are local community developers, owner-occupants doubled
Auction.com, the nation’s leading distressed real estate marketplace, released its 2023 Buyer Insights report, which shows nearly one-third (32 percent) of buyers surveyed expect home prices to decline in their local housing market in 2023, nearly double the 17 percent who expected home prices to decline in 2022.
Buyer Insights report findings are based on a March 2023 survey of nearly 450 distressed property buyers from across the country who have used Auction.com to purchase homes at foreclosure auction or bank-owned (REO) auction in the last four years.
“Local community developers buying at distressed property auction are on the frontlines of the housing market and provide a reliable barometer for emerging real estate trends,” said Jason Allnutt, Auction.com CEO. “They are telling us 2023 will bring further home price declines in many areas but also increased opportunities to convert distressed properties into affordable housing supply as prices adjust to a new market-driven equilibrium.”
More than nine in 10 buyers surveyed (92 percent) described themselves as either local community developers (77 percent) or owner-occupant buyers (15 percent). The owner-occupant share of buyers nearly doubled from 8 percent in the 2022 survey. Separate sales data from Auction.com shows that 82 percent of properties purchased on the platform in 2022 were within 100 miles of the buyer’s mailing address. The median distance between buyers and properties was 15 miles for homes sold at foreclosure auction and 21 miles for homes sold at REO auction.
“We have a lot of military buyers here and it’s hard to find them affordable, updated homes in a timely manner,” said Julie, a New Mexico-based buyer. “My investing is helping provide renovated, updated homes to people that would have to rent otherwise.”
Buyers most bearish and opportunistic in West and Southeast
Buyers located in the West region of the country were the most bearish about home price appreciation in 2023, with 43 percent saying they expect home prices to decline for the year. That was up from just 7 percent in the 2022 buyer survey, and it was the highest percentage of any U.S. region. Thirty-seven percent of buyers in the Southeast region said they expect home prices to decline in their local markets, the second highest percentage among the U.S. regions and up from 12 percent in the 2022 survey.
Despite rising expectations for a home price correction in 2023, 87 percent of buyers said they planned to increase or keep the same their property acquisitions for the year, up slightly from 86 percent in 2022.
“Right now, we’re very, very bullish, but cautiously bullish, too, because I don’t know what events are going to come in that could throw a monkey wrench into my plans,” said Paul, a Florida-based buyer who purchases properties at REO auction.
Buyers were most aggressive in terms of 2023 acquisition expectations in the West and Southeast regions — the two regions with the highest share of buyers expecting a home price correction in 2023. Ninety percent of buyers in both regions said they expect property purchases to increase or remain the same in 2023.
More buyers shifting to renovate-and-rent strategy
More distressed buyers are shifting to a renovate-and-rent investing strategy in the slowing 2023 market even while renovate-and-resell remains the dominant strategy. Half of all buyers surveyed said that renovating and reselling to owner-occupants was their primary investing strategy, down from 61 percent in 2022. Meanwhile, 39 percent of buyers surveyed said renovating and holding for rental was their primary investing strategy, up from 32 percent in the 2022 survey.
“(My investing is) providing income to a lot of people and providing affordable rental properties to the community,” said Grace, a California-based buyer.
Nearly nine in 10 buyers surveyed (88 percent) said they typically spend $10,000 or more for renovations on properties purchased on Auction.com. Nearly half (47 percent) said they typically spend between $20,000 and $50,000 on renovations. The average sales price for properties sold on Auction.com in 2022 was $178,000.
The typical renovation budget skewed slightly higher for buyers whose primary investing strategy is reselling to owner-occupants: 53 percent of those buyers spend between $20,000 and $50,000 on a typical renovation compared to 46 percent for buyers whose primary strategy is holding for rental.
“We put finishes in homes that we would like to have in our own homes,” said Kristen, a Massachusetts-based buyer. “We want those purchasing our homes to love the quality and design of the home and not need to do any additional work. We always look for the hidden things that need to be fixed or changed and never settle for shoddy construction.”
Neighborhood stabilization an important motivation
A majority of buyers ranked “Making Money” and “Building Generational Wealth” as one of their top three motivations for investing in real estate.
“A single mother for many years, … investing affords me financial independence with a goal of creating a solid platform for my sons,” said Kerry, an Alabama-based buyer.
Nearly half of buyers (47 percent) ranked “Improving Neighborhoods” as a top-three motivation while both “Expanding Homeownership” and “Providing Affordable Housing” were top-three motivations for more than one-third (38 percent) of buyers surveyed.
“I pay the closing costs for veterans, first responders, and educators to help expand home ownership among these groups,” said George, a Texas-based buyer.
More than 200 of the 448 buyers surveyed provided a short story of how their investing is helping communities through an optional open-ended question at the end of the survey.
About Auction.com
Auction.com is the nation’s leading online marketplace for the disposition of distressed residential properties. The company goes beyond traditional disposition programs, offering tools and services that stabilize neighborhoods, expand homeownership, maximize sales, shorten the sales cycle, yield higher returns, mitigate risks and elevate results. Our seller strategy includes customized and flexible programs, data intelligence and buyer insights, and pioneering technology. This includes Remote Bid®, which expands the buyer base nationwide by letting buyers bid on and win select foreclosure sales from anywhere, and Portfolio Interact™, featuring Bid Interact™. The national footprint for online and in-person auctions includes all 50 states, as well as Washington, DC, and Puerto Rico. Auction.com is headquartered in Irvine, CA, with offices in key markets nationwide.
Contact
Daren Blomquist
Auction.com
Tel.949.355.3371
Email: dblomquist@auction.com
