Short Sales + Foreclosures
This is a statistic about Sonoma County listings was recently reported by the local sponsor of a seminar for agents about short sales that I attended. As alarming as this may sound, the similar measure in the Sacramento market was reported as being over 70%.
Foreclosures represent homes owned by lenders who have foreclosed on the previous, defaulting owners. These lenders, having no interest in owning the home are offering it for sale to recover whatever amount the market will generate. Short sales are sales in which the net proceeds the seller will receive are less than the amount necessary to pay the mortgage balance, and these sales require approval of the lender to accept a lesser amount. In many cases if a lender does not agree to the short sale, the next step is foreclosure.
At least part of the explanation for the higher number of properties currently on the market is that many of these “distressed” properties may not even be for sale if the owners had not come under stress that has resulted from mortgage rates and payments that have adjusted to a level beyond which the owner could afford.
While it’s little comfort to those who are experiencing pressures and dislocations by the present market conditions, on the whole the market mechanism is working to restore a balance that was lacking. Prices will adjust to clear the market of excess inventory, buyers previously priced out of the market will regain access to home ownership and lenders, chastened by losses, will return to more prudent lending practices. Each of these steps bring us closer to a better situation.
Market report Mar 08
The inventory of homes on the market is rebuilding from the winter slower season. A modest increase in the number of closed sales in March kept the absorption rate (i.e. number of months of inventory) at a slightly better level than it has been over the past half year. Prices, as evidenced by county-wide median sales price continues to reflect the imbalance between sellers and buyers.