Foreclosure Discounts No Longer As Deep

According to recent national figures, during the peak of the mortgage crisis, foreclosed homes were selling at an average of about 25% below market rate; offering deep discounts for ready buyers. Since that time, however, home prices have steadily risen while the foreclosure market hit bottom– two dynamics that are very good sign the housing recovery is taking hold. The numbers we often hear in the media are national figures; but I have done some research on our local market, and the results are very similar. Bottom line: The distressed housing market in Los Angeles County continues to show signs of long-term stabilization. And that is good on a number of levels.

Over the past six months, there have been about 39,000 properties which have been on the market as either a short sale property, or, a bank owned foreclosure. The final sale price of these homes has averaged right around 96% of the original list price. That number is in line with the price differential of standard sale homes; and is actually higher than many in a number of specific cities.

Another interesting sign within this group; sale prices have been creeping up, as the number of days on market have been dropping substantially. During the past twelve month time period, the average sale price of distressed homes has increase about 10%, while the average days these properties have remained on the market has dropped a whopping 41%. Homes that used to sit on the market for more than two months, are now sold and closed in just over five weeks.

In terms of a specific product on the market, roughly 80% of this activity has been occurring in the price range of $400,000 or below; a price point where we often see first time home buyers and/or investors as the most active buyers. From the standpoint of an agent, I’m finding this activity generally healthy for both the overall market, and, the neighborhoods in which the purchase of distressed properties is occurring. I have been working with more and more buyers that find themselves “in the game” at a time when interest rates remain at historic lows.

In cases where the buyers of distressed properties are either first time home buyers, or those stepping up from say, perhaps a condominium to a single family home; the effect I’m experiencing from buyers is on the level of emotion as much as anything else. Most of the buyers look forward to what the market will bring in their view– optimism has returned. For those that are in the business of investing, and flipping properties; they are finding they have to find better deals on the front end, and produce a better product on the back-end. I have seen some really remarkable remodel jobs over the past year, and because the inventory of quality homes is very, very low right now; these properties do not last very long. Some of the investor types do get a little too optimistic and over price the property; but as it usually does, the market has a way of whipping them into shape and repricing the property at a level that is in line with the neighborhood.

So while the industry thinking nowadays is that we are looking at many more years of distressed properties on the market; the good news is the price points for those properties are becoming more in line with the overall market price of homes. That creates a stabilizing dynamic that washes over the rest of the neighborhood; which then grounds the home prices, and, helps remove the anxiety buyers might have for jumping in the market; or potential sellers might have for putting their property up for sale.

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Categories: LATEST NEWS

Author:Marino Real Estate

Specializing in residential and commercial real estate sales for the better part of a decade, my approach to real estate involves establishing a trust with my clients, that contributes to the ultimate success of our transaction. Whether it is a personal residence, or an investment property, I am committed to negotiating the best deal for my clients, and have enjoyed a history of meeting the important and unique needs of the many clients which have entrusted me with thier real estate goals.

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