Bank Owned Houses to Comprise up to 50 Percent of Home Sales

Bank owned houses have been projected by JPMorgan Chase analysts to comprise 9 to 50 percent of house sales in 6 of the biggest markets in the country by the final quarter of 2012.

The biggest percentage is expected in Phoenix, where real-estate owned sales will account for 39 to 50 percent of all its house sales in the final quarter of 2009. The percentage would be higher than the 37-percent share in the last quarter of 2009.

In San Diego, where 25 percent of all house sales were bank owned last year, REOs would account for 24 to 31 percent of house sales in 2012.

New York City is also expected to see a sharp growth in its distressed property listings over the next couple of years. About 12 to 16 percent of home sales would be foreclosure sales in 2012, higher than or at the same level as the 12-percent REO share last year.

The housing markets projected to hover around their current REO sale percentages are the California cities of San Francisco, Santa Ana and Oakland. Santa Ana, which had an REO sale percentage of 30 percent in the second quarter of last year, is projected to have 18 to 23 percent of its home sales coming from listings of bank owned houses.

In San Francisco, nine to 12 percent of its home sales in 2012 are expected to be REO sales, just about the same as its REO share of 14 percent in the April-June quarter of 2009 and its REO share of 10 percent in the final quarter of 2009.

Oakland is expected to post an REO share of 18 to 23 percent, far below its 47-percent share in the April-June quarter of 2009, but just about the same level as its REO share in the last quarter of 2009.

In contrast, the cities of Chicago, Los Angeles, San Jose and Long Island are expected to improve their nondistressed sales in 2012. Los Angeles would be the most improved in nondistressed sales, posting a 22- to 28-percent REO share in 2012, a big improvement from its 53-percent REO share in the middle of 2009 and its 39-percent REO share in the fourth quarter.

According to JPMorgan, the peak percentage of sale of bank owned houses may have been reached already in the spring of 2009, but REO sales will continue to dominate home sales in most housing markets through 2012.

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