Foreclosures VS Home Values

By
Real Estate Agent with Native Sun Realty, Inc.

What’s it going to take to stabilize home values?  Here's my take on the situation. The Jacksonville real estate market continues to favor buyers with over 16 months of residential real estate currently for sale. Property values in Jacksonville and the immediate area have adjusted downward in response to a decrease in demand and a surge in short sale and foreclosure inventory. For example, there are currently 12,852 single family homes for sale in Jacksonville. 28% of those are listed with a title status of “pre-foreclosure” or “foreclosure”. In the last 30 days 757 single family homes were sold with 42% of those sales being pre-foreclosures, short sales, or foreclosures. The disproportionate number of foreclosure sales points to a trend among homebuyers to aggressively seek out bargains. In fact foreclosure sales have become a lucrative niche market for REALTOR’s specializing in in foreclosures.  Sellers not in financial distress who need to sell are adjusting their prices downward in order to compete with the lower priced foreclosures. This activity is exerting downward pressure on home values which has resulted in an 11% decline in Jacksonville’s average sale price since Dec 07. A continued decline in home values will result in more short sales and foreclosures which will drive values down even further. It is a self perpetuating scenario. This is why selling off or reducing the existing foreclosure inventory by any other means is what is needed to stabilize and restore home values.

 

What motivates a bank to sell homes at fire sale prices?  It’s strictly business.  Banks are in the business of loaning money.  When a bank exercises their right to foreclose on a home due to non-payment they now have money tied up in a non-performing asset.  Each month the bank owns the home they loose money in lost interest and other costs associated with owning the property.  It is in the best interest of the bank and their investors to convert that asset back into cash that can be loaned out as quickly as possible.  Banks know that homes priced slightly below value will sell more quickly than homes priced at or slightly above market value.

 

How much lower will values fall?   One guess is as good as another and I would take anyone’s opinion with a grain of salt.  Everyone knows that real estate values rise and fall in cycles.  A look back in history will prove that.  Restoring confidence in the eyes of the consumer is critical in shortening the down cycle.

 

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Topic:
Real Estate Market Trends
Location:
Florida Duval County Jacksonville
Tags:
market conditions
homes for sale
foreclosures
home values
jacksonville
real estate
florida

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Rainer
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Ted Jernigan
Ebby Halliday Real Estate - McKinney, TX

Based on information from someone who has attended every monthly foreclosure sale in Collin Countyfor the past 15 years, banks are doing some uncharacteristic things here. The last two auctions saw some lenders opening bidding on the courthouse steps at levels substantially below the amount owed on the property. Historically they always enter a bid equal to the amount owed. I am not quite sure what they are doing unless they have decided to try to cut their losses by dumping properties they do not want to have in their REO inventory.

Jan 26, 2009 11:04 AM #1
Rainer
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Lucien Vaillancourt
Native Sun Realty, Inc. - Jacksonville, FL
Jacksonville Florida Real Estate

Ted,  I think the banks may be calculating the homes value prior to an auction.  If the market won't support a sale at the amount owed they may be doing just what you said and dumping the properties.

Jan 27, 2009 03:02 AM #2
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Rainer
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Lucien Vaillancourt

Jacksonville Florida Real Estate
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