Weakness underlying the recent “good news” in Housing Markets

This morning it was reported that the S&P/Case-Schiller home price indices, which are the leading measure of U.S. home prices, showed a monthly increase in prices for the 10 & 20 city composites for the first time in 8 months.  The 10 & 20 City Composites were up 0.8% & 0.7% respectively in April vs. March.  Sounds good so far, and the market cheers!….however; both of these indices are actually down 3.1% & 4.0% from the same period a year earlier, and overall, home prices are back to their price levels from Summer of 2003.

Another issue just reported this morning by DSNews.com (Default Servicing News), is that the combination of a large “shadow” inventory of Bank Owned Properties (REO’s), combined with tight credit conditions for first-time home buyers means that home prices at the low-end of the market will continue to fall at a faster pace than homes priced in the mid & high-end, according to Capital Economics.

We are also seeing REO properties being priced substantially below the current market which is also having a continuing negative impact on non-distressed home sellers.  Nationally, REO properties are being priced on average between 36 -39% below current market values in their respective areas.  To be fair, many of these REO properties need many repairs and many could be considered “fixers”, but they are still putting significant pressure on home prices, as the banks want them Sold quickly.  Buyers are being conditioned to look for those “screaming deals”, while properties priced fairly (at the market) are languishing unsold for months.

Another mostly undiscussed aspect of REO’s being Sold while non-distressed properties remain unsold, is that there are no “move-up” Buyers when a Bank Owned Property is Sold, so this also decreases the Sales for higher priced homes, keeping pressure on the Mid to Upper Priced homes. 

Stay tuned, In future postings, I’ll be discussing interest rates, strategies for different categories of Buyers and the changing demands we are seeing from many Buyers.
-Brian Wilson, Broker
John L. Scott Real Estate – Poulsbo

About admin

Presently I'm a full time Real Estate Broker with John L. Scott Real Estate in Poulsbo, WA. In Kitsap County, our team of two earned one of only four "Presidents Elite" awards for Sales in 2010! I received my degee in Electrical Engineering (BSEE) from the University of Washington in 1999 and then worked as a Sr. System Engineer for Cerner Corp. in Kansas City, MO. I worked on IBM/AIX Servers running Oracle Databases, and MS Windows workstations on the client side installing, updating, and educating clients in the Hospital & Healthcare industries. Previous to all this, I co-founded 2 electronics companies which designed and manufactured a variety of electronic products including test equipment for Volve Penta and Volvo Cars of N. America, Marine Sonar equipment and fish finders, and then our own unique non-intrusive unltrasonic tank fluid monitoring system, which found applications in diverse industries including: cosmetics, nuclear, food, chemicals and semi-conductor processing. In these ventures my positions varied from product design, product development management, and marketing. If you haven't see the new Real Estate Site, for my partner Jana Salmans and I, please visit: http://www.JanaAndBrian.com Thank You for visiting, please come back often. -Brian Wilson (admin)
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