Unbelievably, everybody is under the impression that the housing market is flooded with foreclosures. Just about every buyer that hops into a REALTOR’s® car for the first time is anticipating seeing a deluge of homes taken back by the bank. They are also expecting an incredible deal, after all, isn’t the economy still hemorrhaging?
It is time for a reality check. First, it is no longer a buyer’s market. The expected market time for foreclosures is only 20 days; and, for the market as a whole in Orange County, it is 42 days. Compare that to 54 days for foreclosures and 3.6 months for the entire market in September of last year. The Orange County housing market is HOT. Multiple offers, purchase prices close to, or even above, their asking prices, and cash buyers are the norm.
Second, the number of foreclosures has been steadily dropping. In August, 8% of all sales were foreclosures. Compare that to 15% last year and 44% at the height of foreclosure activity in January 2009. Ever since August 2009, there have been more closed short sales (homes that sell for less than the total outstanding loans) than foreclosures. The gap between the two has been widening. 23% of all closed sales in August were short sales and it was 22% in 2011. As foreclosures have been dropping, the number of equity sellers (a fancy term REALTORS® use to describe regular good ol’ fashioned homeowners with equity in their homes) has been progressively increasing. 68% of all August sales were equity sellers, over two-thirds. It was close to two-thirds distressed in January 2009 with 63% of all sales either a foreclosure or short sale..
The market has come a long way and is in the midst of a recovery. How do foreclosures fair today? They are snapped up like ice cold lemonade during a heat wave. The sales price to list price ratio for foreclosures last month was an eye-popping 103%. That means that, on average, foreclosures closed 3% above their asking prices. A foreclosure listed at $500,000 sold for $515,000.
If a buyer wants to purchase a foreclosure in today’s market, they better bring along a very sharp pencil and a winning strategy to beat out the horde of buyers interested in the same home. There is so much interest that many foreclosures receive upwards of 20 offers. It is common for homes to be pulled off of the active market in order to sift through the torrent of offers. Buyers that like to gamble will enjoy the rush of pursuing a foreclosure. For everybody else, the pursuit of these homes is frustrating and very often a waste of time and energy.
The market has come a long way and is in the midst of a recovery. How do foreclosures fair today? They are snapped up like ice cold lemonade during a heat wave. The sales price to list price ratio for foreclosures last month was an eye-popping 103%. That means that, on average, foreclosures closed 3% above their asking prices. A foreclosure listed at $500,000 sold for $515,000.
If a buyer wants to purchase a foreclosure in today’s market, they better bring along a very sharp pencil and a winning strategy to beat out the horde of buyers interested in the same home. There is so much interest that many foreclosures receive upwards of 20 offers. It is common for homes to be pulled off of the active market in order to sift through the torrent of offers. Buyers that like to gamble will enjoy the rush of pursuing a foreclosure. For everybody else, the pursuit of these homes is frustrating and very often a waste of time and energy.
Steven Thomas
Quantitative Economics and Decision Sciences
