Foreclosures, Not the Great Deal They Once Were
Homebuyers in September enjoyed only a 7.7 percent discount on bank-owned properties compared to 9.1 percent a year ago and nearly 24 percent in August 2009 when the housing market was at its worst.
Dwindling supplies in both the traditional market and the distressed market has narrowed the gap, according to a Zillow analysis.
That means if you waited to buy a home, for whatever reason, you'll soon pay as much for a distressed property as you pay for a traditional sale.
Rethink that waiting strategy.
'The smallest foreclosure discount is found in places where competition for homes is so high, people there are willing to pay the same amount for a foreclosure re-sale that they would for a non-distressed home simply to take advantage of historic affordability,' said Zillow Chief Economist Dr. Stan Humphries.
The culprit is low inventories due to sellers staying out of markets that don't pencil and fewer distressed inventories.
Sellers who can't sell at least for the balance of their mortgage, plus the cost of the transaction, but who can still afford to pay the mortgage, simply aren't coming to market.
The latest Campbell/Inside Mortgage Finance says its market sources believe major banks are keeping many REO properties off the market this year, with traditional seller-hopes for getting more next year and that's contributing to fewer homes for sale, resulting in higher prices on all homes.
Given the Zillow study reflects September prices, the 'How much can I save by buying a foreclosure?' may be moot now that it's November. The market may already have achieved an equilibrium in distressed properties vs. traditional listings.
Zillow also says because foreclosed homes tend to be smaller and in lower-priced locations, prior research tends to overstate the discount on foreclosures relative to non-foreclosures.
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