There were a few articles I came across last week that indicated a drop in new foreclosures recently nationwide. They seemed almost relieved the numbers have dropped, but there is more to the scenario than meets the eye. To the uninformed that is true every year in real estate, foreclosure inventory declines towards the very end of the year. The reason is very simple. Banks do not like to create ill will within the communities they serve. If word gets out that BANK XYZ foreclosed on the Smiths and threw them out on the street two weeks before Christmas or New Years it would seem cruel and heartless. In other words it is bad public relations policy. Word of the foreclosure would travel through the community very quickly, and the result would most probably be a loss of business to the lending institution. So what do many lenders do? They withdraw, or defer placement of those foreclosure homes on the active market until just after the New Year! This usually translates into more foreclosure homes inventory coming on the market in the New Year.
This year... with the foreclosure inventory at an already very abnormally high rate... it remains to be seen how many new foreclosure listings will come on the market. In the Atlanta area, I believe it will be very high. we recently had a few clients walk away from their home and turn the keys over to the bank. Since I am also licensed in Virginia, the foreclosure inventory numbers there have already grown substantially in a market where once they were a very rare commodity. I believe foreclosures will rise for the first part of the year, and then start to gradually level out. Before the market recover, inventory levels must decline substantially before recovery begins. The only problem is that high numbers of foreclosures is like placing blood into the water for buyers looking for great deals. Closed price levels of foreclosed homes start to set the tune of new neighborhood comparables. Where once an appraiser would overlooks a distress sale as a rarity when doing an appraisal, the appraiser is now hard pressed to overlook several lower priced closed sales. Their closed prices are now the norm. The first quarter of the New Year is going to set the stage for the coming year in real estate.
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Randy L. Prothero - Hawaii REALTOR® Hey Randy, we have been dealing with foreclosures for several years in the Atlanta area. I know many markets have not had to deal with them before... so the drill is new. I am a firm believer that success begins with understanding the business we are in, how it works, and the dynamics that drive it. Many others operate by luck.