Distressed homes make up large portion of existing salesby Tim Manni
The National Association of Realtors released their Existing-home sales report for October this morning. Reversing two months of positive gains, October’s numbers registered a decline of 2.2 percent. Existing sales are down 2.9 percent from October of last year.
Poor sales figures and erratic reports are expected to continue for quite some time, noted the NAR’s chief economist Lawrence Yun:
Lawrence Yun, NAR chief economist, said the recent sales pattern can be expected to continue. “The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales. Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels,” he said. “Based on current and improving job market conditions, and from attractive affordability conditions, sales should steadily improve to healthier levels of above 5 million by spring of next year.”
We’ll have to wait and see if Yun’s optimistic predictions come to fruition.
Distressed real estate
A particular point of interest in recent reports (even dating as far back as a year) has been the ongoing influence of distressed real estate on monthly sales figures. Even with the robo-signing scandal, distressed homes still made up a significant portion of last month’s report:
Distressed homes3 accounted for 34 percent of sales in October, compared with 35 percent in September and 30 percent of sales in October 2009.
If you’re in a position to qualify for a home loan, there hasn’t been a better time to buy — homebuyers have a lot to be thankful for this thanksgiving. Whether it’s the cheap real estate (thanks to all the distressed properties out on the market), historically-low mortgage rates (the 30-year Conforming averaged 4.52 percent last week, according to HSH.com), or the expanded portfolio of the FHA (which has really become the only lending option for millions), it’s unfortunate that all of these coexisting factors haven’t helped sales figures gain more consistent ground.
How distressed property sales differ
As we discuss the affordability and the availability of distressed properties, it’s important to note some of the cost differentials when comparing a short sale purchase, for example, versus a traditional sale.
One Wall Street Journal reader recently asked, “Are there any unusual or unexpected costs associated with a short sale, compared to buying a regular house?”
The answer is “yes.” According to the Journal:
It’s possible to get a great deal on a short sale–where a home sells for less than is owed on the mortgage–but whenever a seller is in a financial bind, you should be prepared to pay extra costs.
Expect to pay for many of the expenses that a seller would normally pay in the transaction—because the lender, who is taking a loss, may refuse to approve the deal if you don’t.
Just what those costs will be varies.