Consumer Corner: Banks more willing to approve short sales U.S. banks appear increasingly willing to accept short sales -- selling a home for less than the balance on its mortgage -- rather than taking possession of a property, a report by online real estate tracking firm RealtyTrac indicates. RealtyTrac reports short sales accounted for 22 percent of all pre-foreclosure sales last year, an increase of 6 percent, while sales of bank-owned properties dipped 15 percent. The pace of non-foreclosure short sales increased every quarter last year, reaching a seven-quarter high, with the average difference between mortgage balance and sale price at $81,621, down from $87,809 in 2011. By contrast, excess balances on short sales of properties in the foreclosure process averaged $129,817. The U.S. real estate crisis is far from over. Distressed sales -- both foreclosure and non-foreclosure short sales -- accounted for 43 percent of all home sales last year. One in every 849 U.S. housing units was in some level of foreclosure in February. "Although foreclosure-related sales represent a shrinking share of total sales, primarily because of fewer bank-owned purchases, distressed sales are still a disproportionately high portion of the overall housing market," Daren Blomquist, vice president of RealtyTrac, said in a release. And while distressed properties -- whether bank-owned, pre-foreclosure or short sales not in foreclosure -- are still selling at a significant discount compared to non-distressed properties, average distressed property prices are increasing in many markets thanks to strong demand and limited inventory. The National Association of Realtors reported median home prices in metropolitan areas had their strongest showing in seven years in the final quarter of 2012, rising in 133 of 152 metropolitan statistical areas. Median home prices hit $178,900, up 10 percent from the year-ago quarter and the best year-to-year increase since 2005 when the median price jumped 13.6 percent. "Home sales are on a sustained uptrend, mortgage interest rates are hovering near record lows and unsold inventory is at the lowest level in 12 years," said Lawrence Yun, NAR chief economist. Home sales are being fueled by a pent-up demand and job creation, along with still favorable affordability conditions and rents rising at faster rates. Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play. The country is still several years from a normal market, Blomquist said in response to a UPI query. We're expecting foreclosure activity to continue to decrease over the next couple years and finally hit a normal level in 2015. A normal level is about 50,000 to 75,000 properties with foreclosure filings a month. At the peak in March 2010 we were at more than 360,000 properties with a foreclosure filing in a single month. Now we're down close to 150,000 in a single month," he said. In terms of foreclosure sales, a normal level would be less than 5 percent of all sales in some stage of foreclosure or bank-owned. In 2012 we were at 21 percent of all sales in those categories, and at the peak back in 2009 we were at 37 percent of all sales in those categories. It's going to take a bit longer to get back to a normal level in foreclosure sales because foreclosure sales activity trails foreclosure activity but we expect it to be below 5 percent by 2016. Some 947,995 U.S. properties were sold in some state of foreclosure or by banks last year, down 6 percent from 2011 and 11 percent from 2010. Pre-foreclosure sales outnumbered bank-owned sales in 28 states in 2012. Bank-owned sales increased in 26 states. At the same time, average prices for distressed properties increased 2 percent in the last quarter of 2012, compared to the third, and were up 4 percent from the fourth quarter of 2011. Also the pace of non-foreclosure short sales increased 17 percent in the final quarter of 2012. Prices on pre-foreclosure properties averaged $190,031 in the fourth quarter, 23 percent lower than the average sticker price on non-foreclosure residential property, while bank-owned sales averaged $151,998 and were 39 percent cheaper on average than non-foreclosure properties. The time it takes to sell a distressed property was still lengthy, with pre-foreclosure properties taking an average 336 days on the market to sell, down from 359 in the previous quarter but up from the 308 days in the final quarter of 2011, and bank-owned properties were taking 178 days to sell, down from 186 days in the third quarter but up from 175 days in the year-ago quarter. "Dangerous foreclosure flare-ups are still popping up in states where foreclosures have been delayed by a lengthy court process or by new legislation making it more difficult to foreclose outside of the court system," Blomquist said. Foreclosure starts have been steadily building in those states over the last several months and likely will end up as bank repossessions or short sales later this year. New foreclosure hot spots [in February] include states like Washington, where seven straight months of rising foreclosure activity pushed the state's foreclosure rate to fifth highest nationwide --the highest it's ever been in our report -- and Maryland, where eight straight months of rising foreclosure activity placed the state's foreclosure rate among the top 10 nationwide for the first time since July 2010. Nevada had an 86 percent increase in non-foreclosure short sales for 2012, followed by Wisconsin with 45 percent, Washington with 28 percent, North Carolina with 24 percent and Illinois with 18 percent. Michigan, Nevada and Florida had the greatest percentages of non-foreclosure short sales with 33 percent each, followed by Maryland with 28 percent and Ohio with 27 percent. California and Georgia had the highest percentages of foreclosure sales last year, 38 percent, followed by Nevada with 36 percent, Arizona with 34 percent, Michigan with 31 percent, Illinois with 27 percent, Florida with 25 percent, Colorado with 23 percent, Wisconsin with 22 percent and New Hampshire with 21 percent. The biggest increases in sales of bank-owned properties came in Louisiana, where it nearly doubled (97.24 percent), followed by Kentucky (60.79 percent), Delaware (60.79 percent), New Hampshire (24.89 percent), Tennessee (24.71 percent), Illinois (18.59 percent), Nebraska (17.31 percent), Pennsylvania (12.05 percent), Massachusetts (11.69 percent) and Texas (11.15 percent). Riverside-San Bernardino-Ontario, Calif., had the highest percentage of metro-area foreclosure sales at 46 percent, followed by Atlanta (41 percent), Los Angeles (36 percent), Phoenix (34 percent), San Diego (34 percent), Detroit (32 percent), San Francisco (31 percent) and Chicago (31 percent). "Home prices over-corrected on the downside and homes in most of the country were selling for less than replacement construction costs, which means they were undervalued," said NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif. At the same time we've had record low mortgage interest rates and slow but steady improvements in median family income. Combined, these factors boosted housing affordability conditions to the highest on record in 2012. Real estate investor Matt Krause of St. Louis told RealtyTrac competition for foreclosed properties is increasing. Krause said he has been buying properties for $25,000 to $30,000 and renting them out. "They're all cash flowing," he said. Broker Bryan Young, of Young Realty Group and president of St. Louis Investment Property Association, said price points are so low in the St. Louis area, investors are able to pick up properties for as little as $10,000, make $20,000 in repairs and then rent them out for $850 to $950 a month as Section 8 housing, which is subsidized by the federal government.