Home Prices and Foreclosures

Posted on April 3rd, 2008 by saman

An increasing number of home sales are from foreclosures. In California, almost fifty percent of the homes that are sold are foreclosed homes.

This trend causes home prices to go down. This is most notable in states such as Colorado, Nevada and Michigan. It is also evident in places such as Florida and Georgia.

The growing number of foreclosure sales is the symptom and cause of the bad conditions in a weak housing market. Homeowners who do not have to sell their home quickly are taking them of the market. The home inventory that is left is mostly owned by banks that are anxious to sell foreclosed properties at very low prices. They would rather sell these homes than keep them on the books. This costs them money.

As a result of the foreclosures, the value of properties and tax revenues of local governments are suffering. The current housing bust is severely impacting areas where the lending standards were very loose or where the economy is weak. Lax standards in lending were prevalent in such places as California and Nevada. These formerly booming housing markets let borrowers buy expensive houses that they could not really afford. Now the number of defaults is increasing at an alarming rate. Foreclosed properties that are sold at steep discounts make it much harder for homeowners to refinance into loans that are more affordable if the value of the property falls. This has led to more and more foreclosures and this in turn will extend the housing problem.

In places like Nevada and California, a large percentage of homes for sales are those that are foreclosure properties. In Sacramento, California, forty-six percent of homes have gone through the foreclosure process.

Banks are being faced with increasing cost of holding onto properties and as a result they are dropping prices. On average, the price of dropped about one thousand dollars.

Foreclosures may be bad news for homeowners that live in areas with big foreclosures, but they are beneficial to buyers who have money and are trying to buy a home at a bargain price. Banks who are looking to get foreclosed properties off their books are looking for buyers how can close deals as fast as possible and can put down a sizable down payment.

About half of the houses on sale in San Diego were either “short sales” or properties owned by the bank. A short sale is when a bank or lender agrees to sell a home for less than the actual amount of the mortgage. Short sales help avoid foreclosure. The number of banks and lenders participating in short sales has increased dramatically.

To help combat this problem, an association of realtors will be conducting a survey of the current foreclosure problem.

The data available about foreclosures can come up incomplete in some instances. Sometimes a realty group does not count every foreclosure sale because there are a lot of foreclosure sales that are purchased through auction and are not listed in regional databases.