Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.

A total of 232,959 homes sold in the period had received a default or auction notice or were seized by banks, RealtyTrac said in a report today.“The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in an interview.

“We’re clearly creating more properties that will be sold at distressed prices than the market is absorbing,” Sharga said. There were more than 250,000 new bank seizures in the first quarter.

The discount reflects the average sales price of homes in the foreclosure process compared with the average sales price of properties not in distress. About 31 percent of all U.S. sales in the quarter were of homes in some stage of foreclosure, RealtyTrac said.

Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month. Bank repossessions climbed 44 percent from a year earlier and will probably set a record in the second quarter, the company said.

Distressed sales totaled more than 1.2 million last year, a 25 percent increase from 2008 and a more than four-fold rise from 2007, according to RealtyTrac.

Such transactions accounted for 29 percent of all sales last year, up from 23 percent in 2008 and 6 percent in 2007. The average foreclosure discount was 25 percent in 2009, 22 percent in 2008 and 26 percent in 2007.

A “normal” market would show foreclosures accounting for less than 2 percent of sales, Sharga said.

Bank-owned properties sold for an average 34 percent discount in the first quarter, up from 32 percent both in the previous quarter and a year earlier. Short Sales

“The competing forces will be bank-owned properties and short sales,” Sharga said. “The more short sales, the lower the average discount is likely to be.”

More at: http://www.bloomberg.com/news/2010-06-30/foreclosed-homes-in-u-s-sell-at-27-discount-as-distressed-supply-grows.html