Watch For Speedier Bank Foreclosure Sales

By
Real Estate Agent with Joe Manausa Real Estate 8508880888

We have reported on lis pendens filings and foreclosure sales for several years now (visit our new TallahasseeForeclosures Site currently in beta testing). The one thing that always stood out was that such a small percentage of lis pendens that were filed actually made it to a foreclosure sale at the courthouse.

Graph Of Distressed Properties In Tallahassee Florida

But things are changing. When we look at the blue trend line in the graph above, we see that foreclosure sales rates have doubled just since June of this year. Banks have been sitting on their hands and now the case files have gathered so abundantly that we will be seeing this trend continue for quite some time.

The Shadow Inventory Emerges

Distressed properties make up a large segment of the shadow inventory of homes that will be coming onto the market in 2010 and beyond.

Now that banks are accelerating the pace of getting these homes to sale, we might see the market pick up its recovery pace that began as early as July of 2009. These foreclosure sales are going to result in the banks taking ownership of the properties and the face of our inventory is really going to start to change.

Historically, banks have had such a minority percentage of the homes for sale in Tallahassee, but by mid year, they will represent more than 10% of the homes on the market in Tallahassee, and more than double that if you count the short sales as bank controlled. And how will this affect the real estate market?

Banks consider these homes “Real Estate Owned” (REO) assets as a bad investment, and they look to sell them as fast as possible. They will continue dropping prices until the REO inventory is liquidated.

In the past, this was such a tiny part of the market that it did not figure into market valuations, they were just outlier statistics. But now that this will represent even a larger part of the market than new construction homes, you can rest assured that buyers will take notice and all values will be affected.

The faster we sweep through these distressed properties, the faster the market will return to “normal.” The real question is just how fast will the U.S. banking system act to sell all of these homes.

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Rainer
22,936
peter gyoerkoes
Exit Realty NFI - Pensacola Beach, FL

The value of listings will fall due to large amount of foreclosures.

Dec 22, 2009 10:58 PM #1
Rainmaker
1,163,163
Joe Manausa
Joe Manausa Real Estate - Tallahassee, FL
Tallahassee Real Estate

I think so Pete. How is it in your area?

Dec 23, 2009 12:26 AM #2
Rainmaker
239,578
Bob Southard
Atlas Realty Service, LLC - Kennesaw, GA
e-Pro - Cobb, Cherokee, North Fulton

Lots shadow inventory still to go around here. Sales volume seems to be picking up but prices are really beat.  Long road to a price recovery, but its good to see some volume picking up

Dec 23, 2009 01:35 AM #3
Rainmaker
1,163,163
Joe Manausa
Joe Manausa Real Estate - Tallahassee, FL
Tallahassee Real Estate

I agree Bob. Unit sales increase is a required step to reducing inventory and then returning to an appreciating market.

Dec 24, 2009 03:03 AM #4
Rainmaker
997,159
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

Some investor friends are finding this out all too soon.  I like your use of the term "outlier statistics" and the chart should become a model for all markets.  Thanks Joe! 

Dec 24, 2009 03:14 AM #5
Rainmaker
1,163,163
Joe Manausa
Joe Manausa Real Estate - Tallahassee, FL
Tallahassee Real Estate

Thank you Kevin. Everybody says real estate is local (and it is true), but non-local conditions have a great effect on the market.

Dec 24, 2009 03:21 AM #6
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Rainmaker
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