If you are interested in purchasing residential real estate in Tallahassee, you will find that more than one in every five houses for sale is listed as a distressed property.
In the past (meaning prior to the housing market collapse and going back to caveman times), the distressed property market was a very small niche of the houses for sale in Tallahassee. Why? Because Tallahassee sustained a very consistent appreciation rate over the years, and there was relatively low speculative building here.
This resulted in a market where house sellers would typically have equity, so people who had a bad economic event occur could most often sell their houses and walk away with some cash.
But today's report will show that we are still far away from "the good old days" and that we still have a lot of foreclosures, pre-foreclosures, bank owned properties, and short sales that still need to be sold in Tallahassee.
Overall, the trend for Tallahassee foreclosures is positive. As we see in the graph below, the total number of new foreclosure filings (green bars) each year is on the decline, as is the total number of foreclosure sales (red bars).
Additionally, we measure the ratio of foreclosure sales to lis pendens filings as a way of tracking the dissolution trend for distressed properties. Right now, due to a significant decline in new filings, the blue trend line shows greater than 100% of foreclosure sales to lis pendens filings.
Now contrast this to the far left side of the graph, back when roughly 14% of all lis pendens filed resulted in a foreclosure sale. I suspect the fact that more foreclosure filings result in an actual foreclosure sale is due to the "lost equity" in the market, meaning houseowners cannot sell their houses without doing a short sale or foreclosure.
This is why choosing the right agent when you are (or might be) needing to sell a house that is likely to have a larger mortgage than the property value is so important. We were recently hired to sell this short sale. The previous real estate company tried to sell it for several months, yet we were able to get it under contract in merely one day. As many houseowners are now discovering, your window for selling a short sale is not great, as banks will likely foreclose upon you if you do not procure a buyer right away.
The Health Of Residential Real Estate Sales
The Tallahassee real estate market is getting healthier, but do not think for a second that we are healthy.
The graph above measures the ratio of new foreclosure filings with the total number of houses sold each month. While the new foreclosures are not directly related to the houses being sold at the same time, the ratio still gives us some insight on the number of failed mortgages as they relate to the residential real estate market activity each month.
Currently, this ratio stands at 22%. One way to interpret this is that for every 100 houses being sold today in Tallahassee, 22 end up being served a lis pendens (the start of the foreclosure process). Now the reality is that the lis pendens are being served on house purchases from months or years ago, but this ratio still has good value for insight into the residential real estate market.
First of all, it is the best we've seen since we began measuring this ratio in 2009, but it is still far higher than what one might expect to see. Do we really expect 1 in 5 housebuyers to default on their mortgage? I don't think so.
But the good news is that we can expect to see a continued decline in the number of foreclosures that hit the market in Tallahassee. So long as we continue to see fewer lis pendens, we will see few foreclosures as a result.
If you want to know more about how foreclosures and lis pendens filings in the residential real estate market are impacting the value of your house, simply drop me a note and we will be in touch right away to schedule a time to help you.