Sales in the Lower Price Ranges Dominating the start of 2010 Home Sales

Guest Contributor: Scott Euteneier, Realtor

In our February 4th post, Strong Pending Home Sales to Start Year, we discussed the drop in price. The number in January was much lower than a year ago.

The number of home sales in the county was less last month than in December, but that drop was expected and was in-line with many expectations. January is simply a slow month for closed sales. (Pending sales, those contracts accepted but not yet closed, were very high during the month. See our February 4th post).

However, the high proportion of the bank properties caused the average sale price to come in at a number less than anticipated. In fact, January’s market statistics placed on explanation point on the concept of shopping for value!

First, as background, there are two types of sales that require the advance approval of a bank. The first is a “Short Sale” transaction. A sale is “short” when the net proceeds, sales price minus the seller’s closing costs, are less than what is owed on the mortgage. If the seller does not have the capacity to make up the difference the bank can agree to remove the lien, which is generally a Deed of Trust, on the property. This, in turn, allows the seller to transfer the property to the new owner.

The second type of transaction that requires bank approval is, of course, the properties that have been foreclosed – “bank owned” properties, which are commonly called “REO” (Real Estate Owned).

For this discussion let’s group both of these transactions as “bank properties”.

While bank properties currently make up only about 10% of the inventory of homes listed for sale in the county, they accounted for nearly 25% of the sales last month. And that trend looks like it will continue. We had an extremely high number of Pending Sales registered in January, and about one-quarter of those were also made up of bank properties.

These types of sales had an average sale price of just over $201,000, very much lower than the rest of the market in our county which came in at an average price of over $262,000 in January. The plethora of bank properties, and the low number of mid to upper properties (see our February 4th post), pushed the average home prices to a lower than expected number.

It is very important in this type of local real estate market to make sure that any decisions you are making are based on a complete analysis of the market as it relates to your specific property. The attention-grabbing headlines and other news analysis of the overall market make for good reading and offer a view of general trends. However, they ought not to play an important part in your final decision.