In a recent thread generated by the July Median’s post, a reader and commenter asked about the differences in median sales price between “distressed” properties vs. non-distressed properties. And by distressed, we’re talking about short sales, foreclosed properties, bank sales, etc.
Per Kevin’s request I decided to take a look at the Solds data from our MLS. Unfortunately the field on which I filter (i.e. “Special Conditions of Sale”) in order to separate distressed properties has no been available for very long. It was only recently added to our MLS system, so meaningful data began to appear in February.
That being said, I have data going back for the last seven months. Not sure what conclusions can be drawn from these numbers; as a few readers have already provided very good comments regarding the value of this info (both pros and cons) in the aforementioned thread. Perhaps we can pick up the discussion here.
|
Month |
total # sales |
median sales price (all properties) |
# of non-distressed sales |
median sales price (non-distressed) |
# of distressed sales |
median sales price (distressed) |
|
August* |
236 |
$235,000 |
118 |
$272,575 |
118 |
$199,250 |
|
July |
429 |
$240,000 |
228 |
$278,500 |
201 |
$215,000 |
|
June |
410 |
$250,000 |
206 |
$290,000 |
204 |
$226,000 |
|
May |
359 |
$252,000 |
207 |
$280,500 |
152 |
$225,000 |
|
April |
358 |
$263,084 |
204 |
$282,750 |
154 |
$240,000 |
|
March |
263 |
$259,000 |
170 |
$265,000 |
93 |
$245,000 |
|
February |
233 |
$267,995 |
189 |
$274,900 |
44 |
$240,000 |
* denotes partial month
Note: If you’ve noticed that the numbers above are a little different from those reported in my Monthly Median Post, it’s because I’ve pulled from a slightly different area and have also included manufactured/modular in the mix.
Data courtesy of the Northern Nevada Regional MLS (NNRMLS) – August 2008.
CommercialLender
I did some quick math:
Month Difference in Median Price % Distressed Sales Overall
August* 27% 50%
July 23% 47%
June 22% 50%
May 20% 42%
April 15% 43%
March 8% 35%
February 13% 19%
(I hope this posted properly/readably, otherwise feel free to delete it and I’ll repost).
At any rate, not certain this is much of a trend to base any assumptions upon, but the data seems to suggest what we all feel is happening, namely the % of overall sales that are distressed is increasing and the difference between medial prices of distressed homes versus non-distressed appears to also be increasing.
I suggest both metrics are due to banks getting the message and trying to offload REO assets. It will be interesting to see if these 2 trends continue in the coming 6 – 12 months.
Now, who these buyers are would tell further data for the future trend, namely are these predominantly investors or real owners looking for bargains?
Kevin Kearney
Guy,
Thanks for taking the time to pull the data. Wow. Couple of suprising things about the difference between the distressed property (mostly forclosures) and the non-distressed sales in the Reno market.
1) Comparing the year over year numbers of last years sales to this years market when we take out the bank as a player shows the drop in prices is much lower than expected. I think this is helpful for home owners trying to understand their situation in light of the fact that the bank took back their neighbor’s house.
2) The sheer spread in the values is larger than I expected. I expected that the buyer would be seeking a discount for whatever was wrong with the house. Foreclosures generally are a different class of housing stock. Those of us that have seen a lot of foreclosures know that they are often in bad shape. It seems that there is an additional factor of the perhaps what one might consider to be bank’s sheer sense of urgency or perhaps even panic to get them off their books. If this spread continues to widen non-distressed seller will have to come down to try and match the bank’s proposition. This may erode pricing in the non-distressed category or cause non-distressed to move over into the distressed category.
3) The trend of distressed property reaching 50% and climbing is alarming and encouraging at the same time. We all know that these forclosures need to be recycled. Maybe it’s arbitrary but there’s something about 50% that’s just disturbing.
BanteringBear
Kevin posted:
“Comparing the year over year numbers of last years sales to this years market when we take out the bank as a player shows the drop in prices is much lower than expected. I think this is helpful for home owners trying to understand their situation in light of the fact that the bank took back their neighbor’s house.”
That’s not an accurate assessment as you didn’t filter out last years distressed sales for an apples to apples comparison. Regardless, I think you’re reading too much into the information.
Let’s not forget that even if a prospective sucker, I mean buyer agrees to purchase a house for X dollars, the house must still appraise out. This pesky little detail is now making it awfully difficult for sellers with visions of fantasy prices.
Royal Flush
Cool data Guy. I hope this screen will remain a feature of all monthly reports.
By not filtering out prior year distressed sales Kevin is actually overstating the drop in non-distressed median sale prices. I think his point is well made and an “apples to apples” would only prove his point further (i.e., non distressed median sales prices have not declined at a rate commensurate with distressed sales). (ya ya ya holding assumptions)
Perhaps an elaboration of the obvious…
billddrummer
Interesting data, and compelling trends.
To me, it points to several things, some good, some not:
1) Banks are more willing to deal than they were some months ago, pushing up the number of distressed sales as a percentage of total sales;
2) Sellers of non-distressed homes are having to compete with bank-owned properties, and if those properties don’t need much work, then that makes the job of the seller (and the listing agent) that much tougher;
3) As more foreclosures move through the pipeline, there will eventually come a point at which non-distressed sales outnumber distressed sales. The problem is, no one really knows when that will happen.
4) There are still more new foreclosures hitting the market than are getting cleared each month.
5) Nondistressed listings seem to be rising, while non-distressed sales are holding steady (seasonally adjusted).
Anyone out there who has additional comments, feel free.