Today I received a news release from RealtyTrac, which is the leading online source for foreclosure properties. The report made me question how the specific Metrowest Massachusetts marketplace is doing in regards to foreclosures. This post will report on the following questions you may have:
- Are there a bunch of foreclosures driving down home values in our area?
- How much of a discount can I get if I buy one of these foreclosure properties?
- Is the market getting worse or better out there?
Foreclosures in Massachusetts
RealtyTrac reports that Massachusetts is one of the top 5 states in % of foreclosure sales for the 1st quarter of 2010. (June 30th - Not really sure why it took so long to issue these stats??) As alarming as this sounds, let's look a bit closer...
Number of foreclosure sales were 2,111 in quarter 1, which is 42% of all sales! Sounds bad, right?
How does this compare to other states they reported on? It works out to .9% of Total foreclosures in the United States.
Still digging a bit deeper, I checked MLS data for number of sales in MA for the 1st quarter. MLS reports 6628 total single family home sales, which works out to 32% of all single family home sales are foreclosure sales. Since they report 2,111 were ALL sales, let's add condos and multifamilies to that number... now it is over 11,000 sales, or about 19% of all sales.
Remember, this MLS data does not include any For Sale By Owner homes either.
OK, I know what your thinking... It is still a high number, Ed! I agree. So, because I am not feeling this strain on the marketplace as a Full Time Realtor in Metrowest Boston, I want to dig even deeper!
In the Metrowest towns of Ashland, Framingham, Holliston, Hopkinton, Natick, and Southborough I pulled data from MLS regarding bank owned property. Here are the findings using only single family properties since the start of 2010:
17 out of 552 Active homes are labeled Bank Owned (3%)
13 out of 158 Under Agreement homes are Bank Owned (8%)
34 out of 597 Sold homes are Bank Owned (5%)
I don't know about you, but there are two results from this investigation.
Number 1 is that I feel better now than I do after reading RealtyTrac's data.
Number 2, where the heck are they getting those numbers from?
Some explanations is that they classify homes in "pre-foreclosure" or "scheduled for auctions" and MLS is only as good as the agent that enters in the data as "lender owned" or "Short Sale".
In my test of RealtyTrac's data, the 1st property I checked was in Ashland. It was listed as a fairly new addition to the property site. Come to find out it was sold months ago on MLS. So for some reason their data is not updated as it should be.
Discounts when Buying a Foreclosure Property
Realtytrac reported that there is quite a discount that a buyer of a foreclosed property can receive. Again, take this with a grain of salt since the way they create these numbers is, in my opinion, flawed.
Massachusetts' average Foreclosure sales price is reported as $161,089. This is about a 35% discount to non-foreclosure sales in the marketplace for the 1st quarter.
They seem to compare Average Sales Prices of all Foreclosure Sales to Average Sales Prices of Normal Sales. Since the majority of Foreclosure properties are on the lower end and are trashed by the past owners or lack of upkeep, OF COURSE they are going to be a discount. Classify this stat as
"worthless data for people who think for a moment!"
From my experience, if you are handy and have some cash... there are lots of great deals out there to go after. These are both foreclosures and non-foreclosures!
Local Market Conditions are Improving
The best evaluation of the local marketplace, in my opinion, contains the following:
A Local group of towns
Use a Specific category of housing, such as Single Family Homes
Look at past several years data to compare it to
Use 6 mos. or a year worth of history
When I do this for Metrowest Boston towns (specifics I am happy to share if you wish), I find the marketplace is showing strength even though Home Owners have taken a hit on property values over the past several years. So, better for Buyers than it is for Sellers.
Here are two tidbits:
Average Days on Market is 96. Over the past 5 years this has ranged from 85 days to 119 days, so very reasonable.
Ratio of Selling Price to Listing Price is 97%. Over the past 5 years this has ranged from 96-98%, so again, very reasonable number.
I put together a graph of the Selling Prices over the course of the past 5 years for these Metrowest towns. There is a 17% decrease in Median Home Values over this time frame. This is data from July to July in each one of these years.
Here is a graph of the Total Number of Sales for these local towns. Look at that promising increase of sales over the past year! The area is running 10% fewer sales than we had 5 years ago.
Everyone under the sun is forecasting that the economy is faltering again, and it is very rare to hear that any uptick in this marketplace has legs to it. Therefore, my report is that the local marketplace numbers right now have strength. We will have to evaluate in this way, often, to see if this continues. I will keep you posted on these numbers over the second half of the year.