Auction Market Dispatch

KEY POINTS

• Uptick in scheduled auctions indicates possible Q1 rebound in completed auctions 
• Q4 demand increased annually in 59 percent of local markets 
• Price buyers are willing to pay accelerates to six-month high in December 
• Auction bid-ask spread narrows as buyers are willing to pay more 

OVERVIEW

The supply of properties available to buy at foreclosure auction dropped to a three-year low in the fourth quarter of 2024 even as scheduled foreclosure auctions rebounded slightly from a two-year low in the previous quarter — the latter indicating that completed foreclosure auctions may also pick up slightly in the first quarter of 2025. 

Demand for properties available at foreclosure auction and bank-owned (REO) auction also dipped in the fourth quarter overall — continuing a trend that started late in the second quarter — but monthly data shows demand decisively turning a corner higher in December following the election.  

Forty-three percent of Auction.com buyers said the results of the November 2024 election increased their willingness to buy properties at auction while only 3 percent said the results of the election decreased their willingness to buy, according to an early January 2025 survey of 145 people who have previously purchased properties on Auction.com. The remaining 54 percent of buyers surveyed said the election results had no impact on their willingness to buy. 

“Election results should create a better market going forward,” wrote one survey respondent. 

Price demand at auction — the average price buyers are willing to pay as a percentage of estimated after-repair value of the properties being purchased — picked up in the last two months of the fourth quarter, indicating that the local community developers buying distressed properties at auction became more confident in the 2025 real estate market following the election outcome.  

When buying distressed properties at auction, local community developers need to anticipate housing market conditions about six months in the future — the typical time it takes to renovate and return distressed properties to the retail market.  

The rising price demand from buyers in the last two months of the fourth quarter helped to narrow the bid-ask spread between what buyers were willing to pay and what sellers were willing to take. That bid-ask spread narrowed despite sellers holding pricing steady for the quarter. 

“The price of everything has increased, including foreclosures,” wrote one survey respondent who said the election results have made him more willing to buy. “However, as long as profit margins stay the same it doesn’t affect me much.” 

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DISTRESSED DEMAND

Demand Down for Quarter, Spikes in December 

After a broad-based pullback in demand in the third quarter, key auction demand metrics showed mixed results in the fourth quarter. Most of these metrics were down for the quarter but showed a strong rebound in December — despite stubbornly high mortgage rates. 

The sales rate at foreclosure auction — the share of properties available at auction that sold to third-party buyers — decreased 3 percent from the previous quarter but was still up 2 percent from a year ago. The foreclosure auction sales rate spiked 7 percent between November and December to a five-month high and was also up 5 percent from a year ago. 

REO auction demand metrics showed a similar pattern. The average number of bidders per REO auction decreased 7 percent from the previous quarter and decreased 9 percent from a year ago to a more than two-year low, but that same metric jumped 8 percent between November and December to a five-month high. Additionally, the share of REO auctions with a quality bid — a bid within 30 percent of the seller’s reserve — increased 2 percent from November to December to a six-month high. 

Despite the uptick in demand, market conditions are still acting more as a headwind than a tailwind for Auction.com buyers, according to the buyer survey conducted in early January. Thirty-five percent surveyed said market conditions are making them less willing to buy compared to 24 percent who said market conditions are making them more willing to buy.  

“(The) real estate market is stagnant,” wrote one survey respondent who said market conditions are making him less willing to buy distressed properties at auction. “With the high interest rates, (my) buyers pool is almost dry.”  

 

Demand by Market

Foreclosure auction demand increased from a year ago in 37 of 63 major metro areas (59 percent) analyzed in the fourth quarter. Markets with increasing foreclosure auction sales rates included New York (up 12 percent from a year ago), Chicago (up 9 percent), Philadelphia (up 19 percent), Houston (up 14 percent) and Cleveland (up 29 percent). 

Markets with decreasing foreclosure auction sales rates included Dallas (down 20 percent from a year ago), Detroit (down 3 percent), Atlanta (down 10 percent), Minneapolis-St. Paul (down 11 percent), and San Antonio (down 19 percent).  

Markets with the highest levels of demand in the form of their foreclosure auction sales rates were Providence, Rhode Island, Dayton, Ohio, Akron, Ohio, Washington, D.C. and Youngstown, Ohio. Markets with the lowest levels of demand were Minneapolis-St. Paul, Pittsburgh, Wichita, Kansas, San Francisco, and Jackson, Mississippi.  

Price Demand Accelerates Higher to End 2024

Price demand — the amount buyers at auction are willing to pay relative to estimated after-repair value — increased throughout the fourth quarter to end the year at a six-month high for both foreclosure auctions and REO auctions.  

“The shortage of foreclosures going to auction is making us more likely to buy properties with tighter margins,” wrote one survey respondent who said he plans to buy more distressed properties at auction in Q1 2025 than he did in Q4 2024. 
 
Price demand at REO auction rebounded in the fourth quarter from a two-year low in the previous quarter. The average winning bid-to-value rate at REO auction was 56.2 percent in Q4 2024, up from 54.4 percent in the previous quarter and up from 55.5 percent in the fourth quarter of 2023. Price demand at REO auction accelerated throughout the quarter, rising to a six-month high in December.

Price demand at foreclosure auction also accelerated higher throughout the quarter, from a 22-month low in October to a six-month high in December. Despite this acceleration throughout the quarter, the average winning bid-to-value ratio overall for the fourth quarter dipped slightly to 55.8 percent, down from 56.7 percent in both the previous quarter and a year ago. 

Despite the rebound in price demand in November and December, the average winning bid-to-value ratios to end the year were still below early 2024 levels and well below peak pandemic levels in 2021. The bid-to-value ratio for REO auctions peaked in June of 2021 at 67.1 percent, and the bid-to-value ratio for foreclosure auctions peaked in April 2021 at 67.6 percent.  

Price Demand by Market

Price demand trends varied by market, with 34 of 53 markets analyzed (54 percent) posting year-over-year declines in the average bid-to-value ratio for properties sold at foreclosure auction in the fourth quarter.  

“I look mostly at the local market, without paying attention to the entire market,” wrote one survey respondent. “I’m a little less aggressive than I was several years ago, but that is determined by my local market.” 
 
Markets with decreasing price demand included Chicago, Dallas, Detroit, Philadelphia and Houston. The 29 markets with increasing price demand in the fourth quarter included New York, Cleveland, Baltimore, Washington, D.C., and Phoenix. 

Markets with the highest winning bid-to-value ratios were Phoenix (68.5 percent), Lafayette, Louisiana (67.1 percent), Providence, Rhode Island (66.5 percent), San Francisco (66.3 percent), and Washington, D.C. (66.2 percent). Those with the lowest winning bid-to-value ratios were Huntington, West Virginia (26.6 percent), Minneapolis-St. Paul (33.5 percent), Flint, Michigan (34.1 percent), Pittsburgh (34.5 percent) and Peoria, Illinois (42.1 percent). 

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DISTRESSED SUPPLY

Constrained Supply

The number of properties brought to foreclosure auction in the fourth quarter of 2024 was at 42 percent of the pre-pandemic level in the first quarter of 2020, down from 43 percent in the previous quarter and down from 47 percent in Q4 2023 to the lowest level since Q3 2021, when the pandemic-triggered nationwide foreclosure moratorium on government-insured mortgages was still in effect. 

But the volume of scheduled foreclosure auctions, a more forward-looking measure of supply, did rise slightly from a more than two-year low in the previous quarter, coming in at 52 percent of the Q1 2020 level — up from 51 percent in the previous quarter. 

Additionally, the number of scheduled auctions for January 2025 was already at a 19-month high as of Jan. 5, another early indication that volume of completed foreclosure auctions in Q1 2025 may rebound slightly from the three-year low in Q4 2024. 

The supply of properties available for REO auction also rose slightly in the fourth quarter of 2024, to 39 percent of the Q1 2020 level — up from 37 percent in the previous quarter and up from a nearly two-year low of 36 percent in Q2 2024. 

“The amount of REO inventory is very low,” opined one survey respondent. “There are numerous retail buyers bidding up properties. I need to draw a line and say no higher. The margins are getting too tight.” 

 

Supply by State

Supply continued to vary widely by state. States with the most supply of properties brought to foreclosure auction relative to the pre-pandemic (Q1 2020) level were Connecticut, North Dakota, Colorado, Utah, Minnesota, Oklahoma and West Virginia. Fourth quarter foreclosure auction volume in all seven of those states was at or above the Q1 2020 volume.  

“I’m finding more foreclosure properties on which to bid,” wrote one survey respondent who said she plans to buy more distressed properties at auction in Q1 2025 than she did in Q4 2024. 
 
States with the lowest supply of properties brought to foreclosure auction relative to the pre-pandemic level were Florida, New Hampshire, New Jersey, Virginia and Nebraska. Foreclosure auction volume in all five of those states was at less than 25 percent of the pre-pandemic level in the third quarter of 2024. 

“Low inventory (is) pushing us to other markets,” wrote another survey respondent. 

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DISTRESSED PRICING

Bid-Ask Spread Narrows as Price Demand Increases

The bid-ask spread between what bidders were willing to pay and what sellers were willing to take for distressed properties at auction narrowed throughout the fourth quarter of 2024, primarily as a result of buyers being willing to pay more. 

The REO auction bid-ask spread narrowed to 12 points in Q4 2024 after widening to a two-year high of 14 points in the previous quarter. The narrowing of the bid-ask spread accelerated through the quarter, dropping to an eight-month low of 11 points in December. 

The bid-ask spread for foreclosure auctions widened to a two-year high of 7 points in the fourth quarter of 2024, but it narrowed substantially in the second two months of the quarter as price demand from buyers increased. The bid-ask spread narrowed in November and again in December after hitting a five-year high of 8 points in October. The 5-point bid-ask spread in December was a seven-month low. 

The narrowing of the bid-ask spread was primarily due to increasing price demand from buyers rather than a lowering of price supplied by sellers — the average seller reserve price as a percentage of estimated after-repair value. Price supplied by sellers was virtually unchanged in the fourth quarter from the previous quarter for both REO auctions and foreclosure auctions.