An article in the business section of the Rocky Mountain News today focused on foreclosure sales. The article mentioned that during the summer season 1 in 4 sales of residential property were properties that had been foreclosed and currently owned by financial institutions. The silver lining in that dark cloud is that foreclosed property is being sold! Considering that Metro Denver closings in July exceeded last years closings ( 5,123 this year vs. 4,980 in 2007)with the average sale price remaining $40,000 less than last year, and available inventory in decline, the low priced foreclosures have become a mainstay of the market. A quick review of 1000 sold properties closed below $200,000 shows that 13% of those properties sold for cash. That certainly implies an investor purchase. Roughly one half of the closed sales employed FHA or VA financing, which implies owner occupant. The rest were sold using conventional financing, which could be either investor or owner occupant sales.
All of the above would seem to indicate that in spite of record numbers of foreclosures, property sales are strong at the lower price ranges. Investors are buying foreclosed properties for long term hold, and renting them to consumers that possibly were forced from their previous residence by a foreclosure action.
What were are really talking about here is declining inventory. I note with mixed emotions that Centex Homes is leaving the Denver area. While that is bad news for the building sector of the economy, it is good news for the home owner looking to sell in the next few years. At some point, the amount of available inventory declines below the demand placed on the market by home buyers. At that point the market begins to recover.
The bottom line for home sellers today in the Denver market: if you do not have to sell, then don’t. If you must sell, you must market your property with very favorable pricing, and in exceptional condition.
Otherwise, your home will become part of the “stagnant unsold”, not a good place to be.
Written by Larry D. McGee, Denver Realtor - Visit Website
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{ 3 comments… read them below or add one }
ann connelly 08.12.08 at 3:22 pm
Larry, I had my comment all ready to go and then it told me to “answer the question”. What is that about? Anyhow, what I was going to say was this makes sense, now that I read your point. Why do we have appraisals for mortgage loans, really? Do they artificially create a market price? Why can’t we just have an evaluation that says “acceptable or not acceptable” or a price range, instead of assigning a specific price in those instances? It seems those appraisers have an awful lot of power to influence.
ann connelly 08.12.08 at 3:37 pm
Is this a math quiz? My comment above was for your appraisal observations. Don’t know how that got there. Okay, yes I do, but nevermind!
I have sold a few of those bank/lender owned properties mentioned above to my Buyers. They are going fast and for above listing price. My concern is that with the competition for these homes, the prices are being driven up substantially by Buyers who must offer way above the listing price to have a chance. I have been told that investors are winning these multiple offer situations for the most part and converting those homes to rentals. Are they creating a scenario that stifles “affordable housing” in order to benefit from the great rental market?
Guy McLaren 10.07.08 at 10:40 pm
Foreclosures are becoming a real problem in the South African market as well, Having a 38% year on year decrease in property transactions makes it really difficult for people who are being hung out to dry by conditions beyond their control.
Guy McLarens last blog post..Property Sales transactions decrease 38% year on year