Banks Outsell Builders in 2010

In the largest 100 housing markets across the nation, new-home transactions continue to lag sales of distressed properties by a substantial margin. On an annualized basis, new homes only captured 11 percent of all home closings through September 2010, compared to 28 percent absorbed by sales of distressed properties owned by financial institutions, commonly referred to as REO sales. In other words, across the largest markets in the country, banks sell more homes than builders do, and at a much lower price per square foot. Only 18 markets buck this trend, and indeed the markets where new homes outsell their distressed counterparts are some of the healthiest. In Raleigh, N.C., new homes represented nearly a third of all home closings while only 11 percent were REO transactions. Charlotte, N.C., also placed in the top 5 when ranked by number of new homes sold over REOs, as did three Texas markets. These regions of the country have tended to perform better through the downturn thanks to typically stronger economic fundamentals and had less of a run up in home prices during the boom years compared to other areas. These healthier markets also report less of a discount when it comes to REO prices, ranging from $22 to $25 per square foot for the top 5 markets, compared to a much more significant $39 per square foot undercut for the largest 100 markets combined.

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