A Look Back: REO Properties During the 2008 Housing Crisis
An REO (Real Estate Owned) property is a type of real estate owned by a lender, typically a bank or government agency, after an unsuccessful foreclosure auction. When a homeowner defaults on their mortgage, and the foreclosure process begins, the property is often put up for auction. If it doesn’t sell at auction, it becomes an REO property and reverts to the lender.
Key Characteristics of REO Properties:
Bank-Owned: The property is owned by a lender after foreclosure, usually a bank, credit union, or government entity.
Typically Sold “As-Is”: REO properties are often sold without any repairs or improvements by the lender, which can lower their market price but may require the buyer to take on repair costs.
Potential for a Discount: Since these properties are often sold as-is, they may be priced below market value, although they may also come with risks, such as needed repairs or deferred maintenance.
Cleared of Liens: Lenders typically clear any liens, including unpaid taxes or homeowner association fees, before selling the property, ensuring the buyer receives a clean title.
Opportunities and Risks with REO Properties:
While REO properties can present attractive pricing, buyers should be prepared for potential risks. These include:
Repairs or Maintenance: Many REO properties have been vacant or neglected, potentially requiring significant repairs.
Bank Negotiation: The process of purchasing REO properties may require negotiating with the bank, which can be different from a traditional home purchase process.
REO Properties During the 2008 Housing Crisis:
REO properties played a pivotal role during the 2008 housing crisis, as the collapse of the subprime mortgage market led to a wave of foreclosures. Many homes that did not sell at auction became REOs, contributing to a flood of distressed properties on the market.
Key Phases of REO Growth During the Crisis:
Early 2007 - 2008: Rising Foreclosures
The initial phase of the crisis saw a sharp increase in mortgage defaults, particularly among subprime borrowers. By the end of 2008, nearly 861,664 REO properties were recorded across the U.S.2009 - 2010: Peak of REO Listings
The REO market reached its peak in 2010, with banks offering distressed homes at significant discounts. During this time, over 2.9 million homes received foreclosure filings, many of which became REOs.Late 2010s: Gradual Decline
As the housing market stabilized, the number of REO properties gradually decreased. Government programs, such as mortgage modification initiatives, helped curb the rate of new foreclosures, though a backlog of unsold REO properties continued to influence the market for several years.
Current REO Market in Idaho (2024):
In Idaho, foreclosure activity remains moderate, with 119 housing units entering foreclosure recently. The state is ranked 38th in population and holds the 28th spot in foreclosure rates, meaning that one in every 6,377 households is in foreclosure. The counties with the highest foreclosure rates include Custer, Bingham, Bonneville, Caribou, and Bonner. Despite this rise in foreclosure activity, REO properties in these counties present opportunities for buyers, especially those looking for properties at potentially lower prices.
Conclusion:
Both in 2024 and during the 2008 housing crisis, REO properties have played a significant role in the real estate market. While current REO activity has increased in certain regions, it remains well below the levels seen during the peak of the housing crisis.
For more information on foreclosure statistics and REO property trends, check out these resources:
ATTOM Data Solutions - U.S. Foreclosure Market Reports
This source provides detailed foreclosure statistics, including REO property trends and foreclosure filings across the U.S.
ATTOM Data Foreclosure ReportsRealtor.com - What Are REO Properties?
Realtor.com offers a detailed explanation of REO properties, including what they are and how to approach purchasing them.
Realtor.com - REO PropertiesSoFi - Foreclosure Rates and Trends in 2024
SoFi covers foreclosure trends, including state-by-state foreclosure data, and gives a broader context for how REO properties fit into the market.
SoFi Foreclosure Data
These resources will give you more in-depth insights into REO properties and the current trends in the U.S. real estate market.