Posted on April 22nd, 2008 in Mr Mortgage's Personal Opinions/Research
The story within the story is that prices continue to plummet caused by foreclosure sales, which if sold by a Realtor, get counted in the number. Datquick estimates that 38.4% of all March home sales were from foreclosure stock. Most do not know this. REO/Foreclosure sales have picked up in count due to the massive inventory banks hold. These homes sell for a 20-60% discount. As REO sales grow, prices will come down even further. Right now, banks are only selling a small fraction of their REO mostly through large auction aggregators such as Real Estate Disposition Corp (REDC).
CNBC’s Dennis Kneale loves to talk about what a great thing this is, however, I see it differently. I see it as where one person gets a great deal buying a fire-sake auction home, while everyone in their neighborhood takes a bloodbath due to the price that one person paid. Remember, home values are based upon comparable sales within a small, defined area. I know many of you will say ‘the buyer sets the price so the price is what it would have been anyway’. I say that never before have we seen an economic wildcard in banks releasing inventory slowly (for now) and pricing it at such deep discounts in order to get the inventory off the books as quickly as possible.
On the Jumbo front, prices were down roughly 8.5% nationally and 15% in the Western Region. Dataquick says over half the median drop in prices were due to the lack of jumbo loan financing. Jumbos accounted for just 14% from 38% last year. This is significant. As prices drop, more home owners go into a negative equity position causing more loans to default. The snowball is picking up steam and equity is evaporating quicker than ever.
The only way out off all of this remains a national reduction of mortgage balances for everyone. They will figure it out later than sooner I am sure. -Best, Mr Mortgage
By Shobhana Chandra
April 22 (Bloomberg) — The two-year U.S. housing slump showed no sign of abating in March as sales of previously owned homes fell for the seventh time in eight months.
Purchases dropped 2 percent, less than forecast, to an annual rate of 4.93 million, from 5.03 million in February, the National Association of Realtors said today in Washington. The median sales price declined 7.7 percent from a year earlier. Bloomberg report – Left out foreclosure sale info
NOT SO FAST…below is the Dataquick CA report for March. You can get other States there as well. Very good info.
Dataquick Information services – April 17, 2008
A total of 24,565 new and resale houses and condos were sold statewide last month. That makes it the slowest March in DataQuick’s records, which go back to 1988. Sales were up 19.8 percent from 20,513 in February and down 38.3 percent from 39,811 for March last year.
Of the homes sold in March, 38.4 percent were foreclosure resales.