Foreclosures Down … Again!

by kenlavertu on June 16, 2012

in Featured, Latest News

Here’s some  great news  for homeowners – nationwide foreclosures hit their lowest point since 2007. More locally, Colorado’s foreclosure rates have been helped by our legislature – Colorado foreclosures do not require a lengthy judicial review process. In fact, in all 26 states that require a judicial review, foreclosures remain on the rise.

I know what you’re thinking – Wow, Ken, that’s great news about foreclosures, but what does that mean for me?

High foreclosures act like an anchor on home values. Again, it’s all about the comps. Let’s say a particular Loveland neighborhood has 15 homes for sale – and a whopping 5 of them are foreclosures. Banks almost always sell their foreclosures “as-is” at bargain prices. Those bargain prices force the other 10 homes to lower their prices to match the bargains.

How steep are those foreclosure discounts? Well, it all depends on the neighborhood, but for a rule of thumb, a recent study in Massachusetts estimated that foreclosures typically sell for 27% less than comparable non-foreclosures.

It used to be that foreclosure purchases were a very small slice of the market. Only specialized investment buyers even bothered to purchase them. But with so many foreclosures on the market since 2006, traditional home buyers have been looking for foreclosures first, hoping that the properties are in good shape.

Foreclosures not only affect the market by adding cheap supply, but also affect demand – people who experienced a foreclosure don’t qualify for home loans for several years. This effectively removes a customer from the market. So, foreclosures add cheap supply and reduce potential buyers.

So … how do low foreclosure rates help you? They help every homeowner and especially every homeowner whose considering selling his home. Low foreclosures mean more customers and more stability. And, cross our fingers, we could start seeing home values rise in the near future.

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Post by Ken Lavertu

Ken has written 31 articles.

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