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Trulia’s semi-annual conference call about consumer attitudes toward foreclosures just wrapped.  Hosted by Pete Flint (co-founder and CEO of Trulia) and Rick Sharga (SVP of RealtyTrac), the call reviewed data from Trulia, RealtyTrac and a Harris Interactive national survey.  Here’s the liveblogging recap of the call:

Pete’s opening remarks
According to Harris Interactive (study commissioned by Trulia):

• 55% of US adults are at least somewhat likely to consider purchasing a foreclosed home in the future, compared to 47% who said the same in Nov. 2008
• 40% of US adults expect to pay 50% less for foreclosed home, compared to 30% who said the same in Nov. 2008
• 85% of US adults believe there are negative aspects associated with buying a foreclosure, compared to 80% in Nov 2008
• 74% of U.S. adults familiar with the President’s Mortgage Relief Program are at least somewhat confident it will give homeowners the incentive to renegotiate terms to help prevent foreclosures
• largest group of people interested in buying foreclosures are 18-44 - 2/3 would consider

Overall, real estate transactions are up - especially depressed areas with foreclosures and lower prices (e.g. Nevada, California, Florida).  We can see that consumers are motivated to sell, as 25% of homes on Trulia have seen their price reduced at least once. (Check out the chart of the hardest hit cities below.)  Bottom line - don’t yet see the bottom of the market, but things are getting less worse.

Rick’s opening remarks

• Seeing a steady increase of the number of purchased “distressed properties”
• Estmate ~50% of real estate transactions involve a distressed property
• In some majorly distressed areas, upwards of 80% of transactions involve a short sale, foreclosure or other distressed property
• Some of the risks people associate with foreclosures are true; short sales are timely and not always have a positive result
• Two of the most common mistakes when purchasing foreclosures:

1. Overvalue property itself
2. Underestimate cost of repairs

• Estimate 50-60% of sales going to first-time home buyers, 30% to be investors
• Example of town trying to reduce inventory and stabilize market: Victorville CA bulldozing homes!

Q&A with industry reporters

What can we expect next?
Rick: Next wave of resets throughout this year - default at rates that “will make subprime loans look like a walk in the park.”  Very likely candidates for default, since homeowner already upside down in the first place

How do you reconcile interest in foreclosures with the high negative sentiment about buying?
Pete: from what we read, consumers are bargain hunting.  They are aware of changes in affordability, and this is an opportunity.  That said, they’re prepared to make compromises.

Considering age differences…younger buyers used to be interested in flipping.  Since there’s less of that now, why do you think there’s a difference in age ranges?
Rick: Younger buyers are more willing to take a on a property that needs more work than someone who’s more mature.  Investors are typically buying at 20 cents on the dollar compared to the last sale, and may be selling to other investors.  Many are purchasing and turning homes into rental properties.  Younger looking for a place to live, older for vacation properties and investments.

How does an increase in foreclosure properties impact overall prices for a given area?
Pete: Most activity is around distressed properties.  No quick fixes - have to reduce inventory before prices will stabilize.

10-month supply of inventories right now - what’s healthy?  When do you expect peak?
Pete: According to the National Association of Realtors, inventory is at 9.8 month supply; normal market can be anywhere from 5-6 months.  Don’t predict inventory levels to go down this year.
Rick: We expect to see an increase in foreclosure activity this year, and will experience foreclosure activity for at least next 2 years.  The bigger issue for consumers is how easy it will be to get financing, as right now the market is mostly reliant on either cash for downpayments or FHA loans.

Summary
The housing market is still struggling, but there are slow signs of improvement.  As confidence rises, so will the housing market.  Thanks Rick and Pete for great insights and a great call!

Click here to download the audio file and hear the conversation yourself.  Or, check out the full press release.

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