Industry Data

Home Flipping Sales and Profit Margins Both Decline Across U.S. in 2020

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Number of Homes Flipped by Investors Decreases for First Time Since 2014 ATTOM Data Solutions, curator of the nation’s premier property database, released its year-end 2020 U.S. Home Flipping Report, which shows that 241,630 single family homes and condos in the United States were flipped in 2020, down 13.1 percent from 2019 to the lowest point since 2016. The number of homes flipped in 2020 represented 5.9 percent of all home sales in the nation during the year, down from 6.3 percent in 2019 to the same percentage seen in 2018. The declines in the number of homes flipped in 2020, as well as the portion of home sellers represented by investors, marked the first time since 2014 that both measures decreased annually. While flipping activity declined, gross profits and profit margins shifted in opposite directions. Profits rose in 2020, but profit margins dipped—the third straight year that returns on investments declined. Homes flipped in 2020 typically generated a gross profit of $66,300 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was up 6.6 percent from $62,188 in 2019 to the highest point since at least 2005. But the typical gross flipping profit of $66,300 translated into just a 40.5 percent return on investment compared to the original acquisition price. The latest ROI (before accounting for mortgage interest, property taxes, renovation expenses and other holding costs) was down from 41.5 percent in 2019 and from 46.4 percent in 2018. The 2020 ROI was off more than 10 percentage points from peaks over the past decade in 2016 and 2017. The 2020 figure also stood at the lowest point since 2011. Investors saw their profit margins dip again during a year when the median value of the homes they flipped rose more slowly than the median price they paid to purchase properties—8.4 percent versus 9.1 percent. The decline in home-flipping profits marked a rare weak spot in the U.S. housing market, which otherwise boomed in 2020 despite economic damage caused by the worldwide Coronavirus pandemic. “Last year was a banner year for the U.S. housing market, with the apparent exception of the home-flipping business, which saw its fortunes slide a bit more in 2020. Home flippers did still make a nice profit on investments that generally take around six months to turn around—just not as much as they did in the previous few years,” said Todd Teta, chief product officer at ATTOM Data Solutions. “It’s too early to know if that small slide was a sign of weakness in the broader housing market or just a bump in the road. We will know much more as we gauge other key market metrics in the coming months.” Home flipping rates down in 64 percent of local markets Home flips as a portion of all home sales decreased from 2019 to 2020 in 126 of the 198 metropolitan statistical areas analyzed in the report (63.6 percent). Nine of the 10 biggest decreases in annual flipping rates among MSAs came in the South and West, led by San Antonio, TX (rate down 27.3 percent); Tuscaloosa, AL (down 25.7 percent); Santa Rosa, CA (down 24.8 percent); Brownsville, TX (down 24.1 percent) and Houston, TX (down 22 percent). Metro areas qualified for the report if they had a population of at least 200,000 and at least 100 home flips in 2020. Aside from San Antonio and Houston, the biggest decreases in flipping rates in 2020 across MSAs with a population of 1 million or more were in Indianapolis, IN (rate down 19.3 percent); Las Vegas, NV (down 19 percent) and Austin, TX (down 18.4 percent). Home flipping rates increased from 2019 to 2020 in 72 metro areas with sufficient data toanalyze (36.4 percent). The largest annual increases in 2020 in the home flipping rate came in Norwich, CT (up 38.2 percent); Hartford, CT (up 31.1 percent); Boulder, CO (up 29 percent); Albuquerque, NM (up 26.9 percent) and Anchorage, AK (up 26.2 percent). Typical home flipping returns up in 2020 to highest level in at least 15 years Homes flipped in 2020 were sold for a median price nationwide of $230,000, with a gross flipping profit of $66,300 above the median original purchase price paid by investors of $163,700. That national gross-profit figure was up from $62,188 in 2019 and from $64,000 in 2018 to the highest level since at least 2005. Among the 53 markets in the U.S. with a population of 1 million or more, those with the largest gross-flipping profits in 2020 included San Jose, CA ($274,000); San Francisco, CA ($171,000); New York, NY ($152,000); Los Angeles, CA ($151,500) and San Diego, CA ($147,750). The lowest gross-flipping profits among metro areas with a population of at least 1 million in 2020 included Raleigh, NC ($30,000); Houston, TX ($37,174); San Antonio, TX ($39,867); Las Vegas, NV ($45,600) and Charlotte, NC ($46,000). But typical home flipping returns decline for third straight year With median resale prices on home flips rising more slowly in 2020 than they were when investors were buying properties, the profit margin on the typical flip in the U.S. last year fell to 40.5 percent, from a 41.5 percent in 2019 and 46.4 percent in 2018. The typical 2020 ROI was off more than 10 percentage points from peaks during the past decade of 51 percent in 2016 and 2017. Among metro areas with a population of 1 million or more, the biggest decreases in profit margins in 2020 were in Jacksonville, FL (ROI down from 52.2 percent in 2019 to 39.4 percent in 2020); Richmond, VA (down from 84.4 percent to 73.6 percent); Cleveland, OH (down from 108.2 percent to 98.5 percent); Birmingham, AL (down 65 percent to 58.6 percent) and Pittsburgh, PA (down from 133.8 percent to 128.1 percent). High-level takeaways from fourth-quarter 2020 data The 51,993 home flips in the fourth quarter of 2020 were completed by 43,929 investors, a ratio of 1.18 flips per investor. The share of homes

Home Price Increases in Opportunity Zone Redevelopment Areas Keeping Pace with Nationwide Gains

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Median Values Jump At Least 10 Percent in Almost Two-Thirds of Zones ATTOM Data Solutions, curator of the nation’s premier property database, released its fourth-quarter 2020 special report analyzing qualified low-income Opportunity Zones established by Congress in the Tax Cuts and Jobs act of 2017. In this report, ATTOM looked at 3,588 zones around the United States with sufficient sales data to analyze, meaning they had at least five home sales in the fourth quarter of 2020. The report found that median home prices increased from the fourth quarter of 2019 to the fourth quarter of 2020 in 77 percent of Opportunity Zones with sufficient data and rose by more than 10 percent in nearly two-thirds of them. Those percentages were roughly the same as in areas of the U.S. outside of Opportunity Zones. With prices remaining well below average in most Opportunity Zones, about 38 percent of the zones with enough data to analyze still had median prices of less than $150,000 in the fourth quarter of 2020. However, that was down from 46 percent a year earlier as prices inside some of the nation’s poorest communities rolled ahead with broader market, defying troubles flowing from the 2020 Coronavirus pandemic that slowed or idled significant sectors of the U.S. economy. The pandemic’s impact generally has hit hardest in lower-income communities that comprise most of the zones targeted for tax breaks designed to spur economic redevelopment. Housing markets inside Opportunity Zones continued to benefit from the nation’s nine-year price boom. Opportunity Zones are defined in the Tax Act legislation as census tracts in or alongside low-income neighborhoods that met various criteria for redevelopment in all 50 states, the District of Columbia and U.S. territories. Census tracts, as defined by the U.S. Census Bureau, cover areas with 1,200 to 8,000 residents, with an average of about 4,000 people. “The country’s long run of home-price increases continues to leave no part of the housing market untouched, boosting fortunes from the wealthiest to the poorest parts of the United States. The latest evidence is the fourth-quarter 2020 data showing prices going up in Opportunity Zone neighborhoods at around the same rate, and sometimes more, than in more well-off communities,” said Todd Teta, chief product officer with ATTOM Data Solutions. “No doubt, prices remain substantially lower in Opportunity Zones, but the fact that they often rose by double-digit percentages in Q4 is significant. Not only does it show market strength, but it also suggests that many distressed communities are ripe for the redevelopment that the Opportunity Zone tax breaks are designed to promote.” High-level findings from the report Median prices of single-family homes and condos rose from the fourth quarter of 2019 to the fourth quarter of 2020 in 77 percent of Opportunity Zones with sufficient data to analyze and increased in 58 percent of the zones from the third to the fourth quarters of 2020. By comparison, median prices rose annually in 79 percent of census tracts outside of Opportunity Zones and quarterly in 58 percent of them. (Of the 3,588 Opportunity Zones included in the report, 3,183 had enough data to generate usable median prices in the fourth quarters of both 2019 and 2020; 3,179 had enough data to make comparisons between the third and fourth quarters of 2020). Measured year over year, median home prices rose more than 10 percent in the fourth quarter of 2020 in 1,945 (61 percent) of Opportunity Zones with sufficient data to analyze. That price increase occurred in 56 percent of other census tracts throughout the country with sufficient data. A wider gap emerged when looking at areas where prices rose at least 25 percent from the fourth quarter of 2019 to the fourth quarter of 2020. Measured year over year, median home prices rose by that level in 1,098 (34 percent) of Opportunity Zones and 24 percent of census tracts elsewhere in the country. States with the largest percentage of zones with median prices that rose, year over year, during the fourth quarter of 2020 included Utah (median prices up, year over year, in 89 percent of zones), Oregon (86 percent), Washington (85 percent), Arizona (85 percent) and Connecticut (84 percent). Of all 3,588 zones in the report, 1,356 (38 percent) had a median price in the fourth quarter of 2020 that was less than $150,000 and 598 (17 percent) had medians ranging from $150,000 to $199,999. The total percentage of zones with typical values below $200,000 was down from 64 percent in the fourth quarter of 2019. Median values in the fourth quarter of 2020 ranged from $200,000 to $299,999 in 837 Opportunity Zones (23 percent) while they were at least $300,000 in 797 (22 percent). The Midwest continued to have the highest portion of Opportunity Zone tracts with a median home price of less than $150,000 (59 percent), followed by the South (49 percent), the Northeast (40 percent) and the West (6 percent). Median household incomes in 89 percent of Opportunity Zones were less than the medians in the counties where they were located. Median incomes were less than three-quarters of county level figures in 59 percent of zones and were less than half in 16 percent.

U.S. Foreclosure Activity Drops to 16-Year Low in 2020

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Foreclosure Starts and Completions Hit New Record Lows Nationwide Amid Pandemic ATTOM Data Solutions, licensor of the nation’s most comprehensive foreclosure data and parent company to RealtyTrac (www.realtytrac.com), a foreclosure listings portal, released its Year-End 2020 U.S. Foreclosure Market Report, which shows foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on 214,323 U.S. properties in 2020, down 57 percent from 2019 and down 93 percent from a peak of nearly 2.9 million in 2010, to the lowest level since tracking began in 2005. Those 214,323 properties with foreclosure filings in 2020 represented 0.16 percent of all U.S. housing units, down from 0.36 percent in 2019 and down from a peak of 2.23 percent in 2010. ATTOM’s year-end foreclosure report provides a unique count of properties with a foreclosure filing during the year based on publicly recorded and published foreclosure filings collected in more than 2,200 counties nationwide, with address-level data on nearly 25 million foreclosure filings historically, also available for license or customized reporting. The report also includes new data for December 2020, showing there were 10,876 U.S. properties with foreclosure filings, up 8 percent from the previous month but down 80 percent from a year ago. “The government’s moratoria have effectively stopped foreclosure activity on everything but vacant and abandoned properties. There is a backlog of foreclosures building up—loans that were in foreclosure prior to the moratoria; loans that would have defaulted under normal circumstances; and loans whose borrowers are in financial distress due to the pandemic,” said Rick Sharga, Executive Vice President of RealtyTrac, an ATTOM Data Solutions company. “While it’s still highly unlikely that we’ll see another wave of foreclosures like the one we had during the Great Recession, we really won’t know how big that backlog is until after the government programs expire.” Bank repossessions decrease 95 percent since their peak in 2010 Lenders repossessed 50,238 properties through foreclosure (REO) in 2020, down 65 percent from 2019 and down 95 percent from a peak of 1,050,500 in 2010, to the lowest level as far back as data is available—2006. Counter to the national trend, there were metropolitan statistical areas with a population greater than 200,000 that saw a year-over-year increase in REOs, including Lake Havasu, Arizona (up 30 percent); Champaign, Illinois (up 29 percent); Chico, California (up 26 percent); and Bremerton, Washington (up 25 percent). Lenders repossessed 1,972 U.S. properties through completed foreclosures (REOs) in December 2020, down 2 percent from last month and down 86 percent from a year ago. Foreclosure starts at new record low nationwide, Idaho only state to see an annual increase Lenders started the foreclosure process on 131,372 U.S. properties in 2020, down 61 percent from 2019 and down 94 percent from a peak of 2,139,005 in 2009, to a new all-time low going back as far as foreclosure starts data is available—2006. “The impact of the government foreclosure moratoria and mortgage forbearance programs is nowhere more obvious than in the foreclosure start numbers from 2020. We ended the year with a near-record number of seriously delinquent loans, but historically low levels of foreclosure activity,” Sharga said. “The good news is that the government and mortgage industry succeeded in working together to prevent unnecessary foreclosures; the question remains how many homeowners whose finances have been affected by the pandemic will ultimately default on their loans, and whether the strength of the housing market will help cushion the fallout.” States that saw declines in foreclosure starts from last year included Oregon (down 79 percent); Kansas (down 77 percent); Arkansas (down 77 percent); Nevada (down 71 percent); and Massachusetts (down 70 percent). Counter to the national trend, Idaho saw a slight uptick (up 4 percent) from last year. Those metropolitan statistical areas with a population greater than 1 million that had at least 500 foreclosure starts in 2020 and saw the greatest decline in foreclosure starts from last year, included Jacksonville, Florida (down 74 percent); Las Vegas, Nevada (down 74 percent); Washington, DC (down 72 percent); Memphis, Tennessee (down 72 percent); and Orlando, Florida (down71 percent). Delaware, New Jersey, Illinois post top state foreclosure rates in 2020 States with the highest foreclosure rates in 2020 were Delaware (0.33 percent of housing units with a foreclosure filing); New Jersey (0.31 percent); Illinois (0.30 percent); Maryland (0.26 percent); and South Carolina (0.24 percent). Rounding out the top 10 states with the highest foreclosure rates were Florida (0.23 percent); Connecticut (0.22 percent); Ohio (0.21 percent); Georgia (0.19 percent); and Indiana (0.18 percent). Peoria, Rockford, Trenton post top metro foreclosure rates in 2020 Among 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in 2020 were Peoria, Illinois (0.48 percent of housing units with a foreclosure filing); Rockford, Illinois (0.44 percent); Trenton, New Jersey (0.44 percent); Atlantic City, New Jersey (0.40 percent); and McAllen, Texas (0.35 percent). Metro areas with a population greater than 1 million that had the highest foreclosure rate, were, Cleveland, Ohio (0.34 percent); Chicago, Illinois (0.30 percent); Baltimore, Maryland (0.29 percent); Philadelphia, Pennsylvania (0.29 percent); and Riverside, California (0.28 percent). Average time to foreclose increases annually U.S. properties foreclosed in the fourth quarter of 2020 had been in the foreclosure process an average of 857 days, a 3 percent increase from the previous quarter and from a year ago. States with the longest average time to foreclose in Q4 2020 were Hawaii (2,186 days); New York (1,465 days); Kentucky (1,390 days); Pennsylvania (1,275 days); and Massachusetts (1,223 days).

November Foreclosure Filings Dip from October

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Foreclosure Moratorium Extended to 2021 ATTOM Data Solutions, licensor of the nation’s most comprehensive foreclosure data and parent company to RealtyTrac (realtytrac.com), a foreclosure listings portal, released its November 2020 U.S. Foreclosure Market Report, which shows there were a total of 10,042 U.S. properties with foreclosure filings—default notices, scheduled auctions or bank repossessions—in November 2020, down 14 percent from a month ago and down 80 percent from a year ago. “It’s not unusual to see foreclosure activity slow down beginning in November and through the holiday season,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM Data Solutions company. “Both foreclosure starts and repossessions were down about 80% on a year-over-year basis, but it might be worth noting that a few cities that may be vulnerable to the pandemic-driven flight from urban areas to the suburbs—like New York City, Chicago, and Miami—were among the markets with the highest levels of foreclosure actions.” Florida, Illinois, and Oklahoma post highest state foreclosure rates Nationwide one in every 13,581 housing units had a foreclosure filing in November 2020. States with the highest foreclosure rates were Florida (one in every 7,109 housing units with a foreclosure filing); Illinois (one in every 7,285 housing units); Oklahoma (one in every 8,128 housing units); New Mexico (one in every 9,236 housing units); and Delaware (one in every 9,310 housing units). Among the 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in November 2020 were Champaign, IL (one in every 3,636 housing units with a foreclosure filing); Shreveport, LA (one in every 3,806 housing units); Macon, GA (one in every 3,947 housing units); Davenport, IA (one in every 4,038 housing units); and Evansville, IN (one in every 4,296 housing units). Those metropolitan areas with a population greater than 1 million that posted the worst foreclosure rates in November 2020, were St. Louis, MO (one in every 4,454 housing units); Cleveland, OH (one in every 5,368 housing units); Jacksonville, FL (one in every 5,877 housing units); Louisville, KY (one in every 6,373 housing units), and Birmingham, AL (one in every 6,591 housing units). Foreclosure starts decline monthly nationwide A total of 5,256 U.S. properties started the foreclosure process in November 2020, down 13 percent from last month and down 79 percent from a year ago. While foreclosure starts are down in many states across the nation, a few states did see monthly increases in foreclosure starts in November 2020, including Missouri (up 18 percent), Indiana (up 14 percent), Georgia (up 4 percent), Arizona (up 1 percent), and Texas (up 1 percent). Among metropolitan areas with a population greater than 1 million, those with the greatest number of foreclosure starts in November 2020 were New York, NY (454 foreclosure starts); St. Louis, MO (208 foreclosure starts), Chicago, IL (207 foreclosure starts); Miami, FL (151 foreclosure starts); and Los Angeles, CA (147 foreclosure starts). Bank repossessions see a 22 percent decline from last month Lenders foreclosed (REO) on a total of 2,010 U.S. properties in November 2020, down 22 percent from last month and down 86 percent from a year ago. States that posted the greatest number of completed foreclosures (REOs) in November 2020, included Florida (273 REOs filed); Illinois (167 REOs filed); California (164 REOs filed); Arizona (141 REOs filed); and Georgia (117 REOs filed). Among the metropolitan areas with a population greater than 1 million, those with the greatest number of REOs filed in November 2020, included Chicago, IL (114 REOs filed); Phoenix, AZ (93 REOs filed); Atlanta, GA (88 REOs filed); Birmingham, AL (60 REOs filed); and Miami, FL (58 REOs filed).

Data Analytics in Multifamily Investment

by Dean Kelker
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Major Factors Currently Impacting Multifamily Investing By: Dean Kelker, SVP & Chief Risk Officer, SingleSource Property Solutions The statement ‘real estate investing is not for the faint of heart’ rings ever true in today’s climate. Real estate investing has always been an objective practice, leaning directly on ROI and managing risk. The current political and economic environment presents a series of new and unforeseen opportunities and risks. As a result, investors have been increasingly cautious. Despite the climbing concern, investors can rest assured that they can assess every situation using data analytics to match the existing risk vs. their investment goals. The effects of the pandemic and these new factors must be examined to both mitigate new risks and capitalize on unanticipated prospects that did not exist prior to this event. In order to calm the uncertainty of what the future holds and ensure investors make the right investment decisions, we turn to some of the readily available data, to narrow the investment target to those opportunities that possess the greatest yield potential. Let us identify some of those major environmental factors currently impacting multifamily investing. HOUSING AFFORDABILITY Looking at these factors in the context of commonly available data can bring a more definitive focus to an investment decision in the context of moderating risk and enhancing returns. Markets where housing afford-ability is challenging certainly provide increased opportunity for rental properties as there is typically a larger pool of potential renters. RATE OF INCOME GROWTH VS. HOUSING APPRECIATION Housing affordability also directly ties into the relationship between the rate of income growth as compared to housing appreciation. In those markets where there is a significant imbalance between the rate of housing appreciation and income growth (i.e. income growing at a significantly slower rate than the rate of appreciation in housing prices), housing affordability suffers and conversely creates increased rental opportunities. As a related issue, that imbalance also substantially increases the foreclosure risk in the market which will subsequently increase the potential availability of single-family homes obtainable at attractive acquisition prices to be redeployed by an investor as single-family rentals. UNEMPLOYMENT RATE The market unemployment rate becomes a factor both from the perspective of risk of the investment as well as determining the likely rate of return. The current economic environment presents a good window into how the data must be properly analyzed to reveal the fundamental risk/reward in a particular market. In today’s circumstances, many markets have two unemployment rates; the current spot rate which in most cases is higher than normal, and what I will call a persistent unemployment rate. When the economy was shut down in March there was a national upward spike in the unemployment rate that gradually began to moderate. However, that moderation has been uneven across the country as the economic impact of COVID-19 has been uneven from both a business segment and geographic perspective. Let us look at a market such as Las Vegas—a city largely dependent on travel and hospitality for its economic base. Even as the economy began to reopen, Las Vegas has continued to suffer high unemployment as people have not indicated a desire to return to their previous travel behaviors for reasons of personal health and safety. This has driven the unemployment rate in Las Vegas to what has become a persistently high rate that has resulted in lowered personal aggregate incomes for the residents. High persistent unemployment results in pressure on rents due to declining personal incomes. However, for the investor looking for a longer term holding period coupled with having sufficient financial capacity to sustain a period of suppressed income, high persistent unemployment likely presents opportunities to acquire properties at lower than average prices, yielding higher returns in the longer investment horizon when the property is sold. Therefore, the investor needs to decide whether the reduced short-term income is worth longer-term asset appreciation. FINANCING AVAILABILITY A key element of the investment decision is associated with the availability and sourcing of investment funds. The investor must decide if the funds should come from an internal source or one of the various types of external financing, with the external funds coming from conventional market rate sources or subsidized public sources. Certainly, internally generated investment funds for multifamily housing necessarily compete with other investment opportunities, both real estate and non-real estate. Public sources of financing such as FHA or participation in various government housing programs such as Section 8 or LIHTC programs, establish limitations and requirements on the investor regarding the use and income opportunities with any particular property. The investment analysis of such an opportunity needs to account for many of the previously outlined factors, such as: is there a market for subsidized housing and are the attendant returns within the established parameters of the investor. IMPACT OF COVID-19 RELIEF PROGRAMS The current pandemic has created several unforeseen factors around residential investment such as moratoriums on rent collection, moratoriums on foreclosure, and pass-through of financing moratoriums on to tenants of affected buildings. All these issues have degraded the investment value of residential income property. While most of these policy changes were designed to be temporary, they have been extended as the effects of the pandemic have not abated, resulting in a material level of uncertainty as to when they will end and whether the pre-pandemic investment conditions will return. While the intent of the rent moratoriums was to provide a short term deferral in payments and restore the payments streams in the future, the reality is that for many residential tenants, the ability to pay deferred rents in the future timeframe is likely to be doubtful in the context of the general economic slowdown and widespread unemployment. The investor’s analytics now must reflect both the loss in income, which may impair the ability to make financing payments, coupled with the loss in the value of the asset caused by the diminished income that it is generating. Additionally, in the multi-family rental space, the investor must account for increased costs

Completed Foreclosure Auctions Up 24 Percent to Six-Month High

by Daren Blomquist
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Most auctions on vacant or abandoned properties exempt from moratoria Foreclosure sales rate at seven-year high, REO bids per asset at all-time high Building backlog of foreclosures could exceed 1.1 million by Q2 2021 By: Daren Blomquist, VP, Market Economics, Auction.com Auction.com, the nation’s leading distressed real estate marketplace, released its Q4 2020 Distressed Market Outlook, which shows that completed foreclosure auctions in September increased 24 percent from the previous month to the highest level since the COVID-19 pandemic was declared in March. “Foreclosure supply is slowly returning to the market as servicers refine their vacant or abandoned procedures and as states gradually open up,” said Ali Haralson, chief business development officer at Auction.com. “These vacant or abandoned properties, which are exempt from the national foreclosure moratoria on government-backed mortgages, benefit neighborhoods when they are returned to occupancy.” Foreclosure Auctions by State Despite increasing to a six-month high, completed foreclosure auctions in September were still just 22 percent of year-ago levels—or 78 percent below year-ago levels. States with an above-average share of year-ago foreclosure volume in September included Colorado (92 percent), Oklahoma (86 percent), Kentucky (56 percent), Arkansas (54 percent) and Indiana (49 percent). States with a below-average share of year-ago foreclosure volume included New York, Oregon, and New Jersey (all at 0 percent) along with Washington and Massachusetts (both at 5 percent). Foreclosure Auction Demand Demand for distressed properties—both at foreclosure auction and for online auctions of bank-owned (REO) properties—hit new multi-year highs during the third quarter of 2020, according to buyer demand data from the Auction.com marketplace. The foreclosure sales rate—the percentage of properties brought to foreclosure auction that sold to a third-party buyer rather than reverting to the lender as REO— increased to a seven-year high of 55.6 percent in September. The average price per square foot for third-party foreclosure auction sales dipped in the third quarter, likely because of the shift to vacant or abandoned properties that often come with more deferred maintenance, but the average price relative to estimated full market value (price execution) increased to a 6.5-year high in September. “Buyers are showing up in force at the live foreclosure auctions, both in-person at the auction venues and now also virtually, thanks to the Remote Bid feature on the Auction.com mobile app,” said Steve Price, SVP of trustee operations at Auction.com. “Where available, this feature allows buyers to participate in real time at the auction from just about anywhere.” REO Auction Demand The average number of bids per REO sold via online auction increased to 12.0 in September, the highest average bids per REO sold as far back as data is available, September 2012. The increased competition for online REO auctions helped to push the average price per square foot to an all-time high of $87 in July and average price relative to seller reserve to a new all-time high of 104.5 percent in September. “Buyers can bid, buy and close on online REO auction properties without leaving their homes, making this inventory particularly attractive to real estate investors and other buyers in this season of social distancing,” said Walter Skrzynski, SVP of online auction sales at Auction.com. Estimated Foreclosure Backlog Data from the Auction.com platform and other industry sources shows a growing backlog of mortgages that are in foreclosure or delinquent but not in a mortgage forbearance program. These mortgages will be those that are most likely to restart or continue the foreclosure process when the nationwide moratoria on government-backed mortgages is lifted. “We estimate the foreclosure backlog will have grown to more than 1.1 million residential properties by the end of the first quarter of 2021,” said Daren Blomquist, vice president of market economics at Auction.com. “That means we would expect the foreclosure process to start or restart on the mortgages secured by those properties once applicable moratoria are lifted and courts begin to resume foreclosure cases in judicial states. Given the patchwork of state approaches, the return of this backlogged volume will likely be spread over months, if not years.”