When I read my email inbox this morning, I had multiple “Did you see the front page foreclosure article in the Trib?”. Here it is if you haven’t seen it.
Following are my comments on the article. There are numerous statements in the article that the Tribune has presented as facts, IMO. Knowing how interviews with a newspaper go, I don’t know if the Realtors in the article said what they did or what was printed was taken out of context but I would assume that the Tribune would research any facts it presents.
First, I need to say that I don’t have access to all the info about foreclosures. The Tribune quotes statistics from RealtyTrac which reports to get their data from the SLO County Recorder. While I’ve tried, I don’t have access to the SLO County Recorder info. I, like other Realtors, have access to the Central Coast Multiple Listing Service (MLS).
While most homes sold on the Central Coast go through a Realtor that lists homes on the MLS, there are some that don’t. For Sale By Owners, private sales, Realtor office exclusives, and public auctions are some that aren’t entered into the MLS.
With foreclosures, Realtors have the opportunity to sell both Short Sales and REOs (bank owned) when they are entered into the MLS. For REOs, this is the end of a sometimes lengthy foreclosure process that beings with a Notice of Default.
When a bank takes ownership of a property, most will contact a Realtor who will provide the bank with the price they should list at and enter it into the MLS so all other Realtors can sell the home, similar to any non-REO property. Realtors use the MLS system to look up comparables to determine the price.
I wanted to state this before I start commenting about the Tribune article since the things that are stated in the article come from different data sources.
> The Tribune states that there have been 1,468 filings in 2008 (through August I assume). According to the MLS, we’ve had 269 REOs sold in the county through August and 86 short sales which is a small percentage of the filings. Even if you add in the 70 Active REOs on the market, it only counts for 29% of the total filings reported. In 2007, the Tribune reports that there were 749 filings but only 93 REOs and 36 Short Sales were sold and reported in the MLS. What I don’t know is what happened to all the other filings? Also, I’m wondering how SLO County compares to other Counties with percentage of filings that make it to the MLS.
> The Tribune states that Paso Robles has had 430 foreclosure filings, including 63 REOs. I’m assuming that the filings data is from RealtyTrac but not sure where the REO data is from. The MLS reports that there have been 64 REOs sold in 2008 in Paso Robles (doesn’t count how many REOs are currently on the market).
> The Tribune states “In many cases, foreclosures have sold quickly and for more than the bank’s asking price…” The average Days on Market (DOM) for REOs in 2008 (through August) is 42 days compared to 114 Days for non-foreclosure homes. Short Sales had an average DOM of 137 days. I went through the 269 REOs sold in 2008 (through August) and I’d estimate that less than 10% went above the list price. Most of these were a few thousand dollars over list. But, for every one I saw with an overbid, there was a REO that went for 10-20% below the list price. What the averages say is that REOs go pretty close to the list price (less than 1% less from list price). Since Realtors are the ones recommeding the list price to banks, you’re going to see this happen. Some Realtors will convince the bank to price it low so they don’t have the listing sitting on the market. Most banks don’t pay the typical commission to the Realtor that lists the REO so they aren’t going to put much into marketing the home so they want a low price to bring the buyer and sell it quick. Unforunately, this doesn’t help the neighborhood’s value when a Realtor isn’t trying to get the best price for a home.
I see no evidence that banks are purposely pricing REOs low to get overbids as stated in the article. If they are doing this and not getting the overbids then the rest of the neighborhood’s value gets hit hard!
> The Tribune states that Nipomo prices have fallen 49% over the last 2 years. When I first saw this I went WHAT??! On my median home price page, Nipomo median home prices fell 9.69% between the first half of 2007 and 2008. We’re almost done with the third quarter when I’ll be doing median home price calculations after the end of this month but I thought I’d do Nipomo’s through today to see what the 3rd quarter is shaping into. What it shows is that the median home price for Nipomo is now at $373,000 which is way below the $565,000 median home price in the first quarter of 2007. But, as I posted a few days ago, the median home prices are being skewed by fewer higher-end homes being sold. For Nipomo, the amount of homes selling above $600K in this quarter-to-date is 5 out of 37 (or 13.5%). For the same period last year, it was 17 out of 40 (or 42.5%). I wish newspapers would quit stating price drop comparisons if they aren’t going to explain the numbers!!! This is really misleading.
To end this with my opinions about foreclosures is that they DO cause neighborhood values to decline. Banks don’t want their properties to sit 100+ days on the market and with the amount of inventory the way to move properties is by price. Realtors also want their REO listings to sell and since banks are looking to Realtors to determine the price, not many Realtors are going to price a REO to sit. When REOs sell, they are now the new comparable in the MLS that a Realtor is going to use to price a new listing or to recommend a Buyer offer on a non-REO listing on the market. I have heard no one say “well that one was an REO so you can add 10-20% to the price and that’s what this comparable home is worth”. To recover from the impact of REOs, a neighborhood is going to need future comparables that show a “rebound”. And I’m not seeing Realtors pricing REOs higher than the comparables.
If you want to track REOs and Short Sales, you can use my listing reports:
http://www.slocountyhomes.com/reoex.php – REO Listings on the market
http://www.slocountyhomes.com/shortex.php – Short Sale Listings on the market
http://www.slocountyhomes.com/newlistex.php – New Listings with foreclosures noted