REO sales are the closest thing real estate has to a pure market. No home owner emotional involvement to skew pricing realities, and no short sale issues to confuse the negotiations. I analyzed 119 bank owned homes and condos in Windsor California that have sold this year. All of these homes had either been sold or refinanced between 2003 and 2007 so I could get a clear reading of the market price changes since the peak of the real estate bubble.

First, the good news. Although there has been a significant drop in the market since the peak in late 2005 (in our area), the sales activity for REO properties is robust and the inventory has been vanishing. For Sonoma County as a whole, there is less than a sixty day supply of REO property. As you can see in the chart below, the start of the year consisted of sales that averaged about 85% of listing price. A careful reading of the numbers shows that both buyers and sellers were unsure of pricing, so listing prices tended to start too high and buyers were completing purchases at relatively good discounts. Since then, listing agents have gotten a better feel for the market and buyers seem to agree. Most bank owned homes in Windsor are selling for at or above the listing price. Now, for the other side of the coin.

The bubble crept up on most of us. We thought it was just a hot real estate market and ignored the spread between what people could really afford and what they were paying. The next chart has a dot representing each Windsor REO sales price and the percent that sales price has declined from its own peak value.

I think everyone can draw their own conclusions from this data. I have some other charts that demonstrate the declines in value in slightly different ways, but it's clear that for this one town in Sonoma County, price declines in the 35% range are the norm. Some prices have gone down as much as 50%, but they're the exceptions. Or as I put in in the chart, the "Ouch" exceptions.

This market continues to be very active. My reo.sonoma.net blog talks more about these issues and has a map based searching tool for people looking for bank owned properties in Windsor or Sonoma County.