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More families moving into distressed properties

More new homeowners are choosing distressed properties.

More new homeowners are choosing distressed properties.

A new report says that new homebuyers are increasingly choosing to purchase distressed homes.

A study by Campbell Surveys found that while the prices for bank-owned properties and short sales have risen, selling prices and buyer interest on non-distressed homes has fallen drastically following the expiration of the first-time homebuyer credit.

Prices for damaged REOs - those foreclosures which need significant work - rose 6.3 percent from July to August, while the prices of non-distressed homes fell 0.9 percent over the same period. Short sale properties showed price increases of 3.8 percent.

"We're in transition," said Thomas Popik, research director for Campbell Surveys. "Individual homeowners listing non-distressed properties and mortgage servicers listing distressed properties are holding out for prices established before the end of the tax credit. Meanwhile, only a few homebuyers are willing to transact at these prices."

A growing number of foreclosures are entering the market. Recent statistics from RealtyTrac found that the number of bank repossessions rose 25 percent in August compared to a year earlier, and foreclosure notices overall jumped 4 percent.