Foreclosed property in January was reported as selling at a 20 percent discount, while short sale properties sold at a 12 percent average discount according to the January REALTORS® Confidence Index.
- Approximately 24 percent of sales were distressed (foreclosures, short sales), compared to approximately 40 percent in March 2011.
- Property condition has a major impact on sales, with below average foreclosures reported as selling at a 24 percent discount to market, compared to properties in above average condition going for 13 percent below market.
The discount to market is affected by the property’s physical condition. The unweighted average price discount for the period January-December 2012 is about 15 percent for houses in above average condition and about 35 percent for those in the poorest condition.
What this means for REALTORS®: Keep emphasizing the value of good home maintenance to build up home equity and maximize price.
Based on information from the November 2012 REALTORS® Confidence Index Survey, foreclosed property sold on average at a 20 percent discount, while short sale properties sold at a 16 percent average discount.
The discount to market experienced by distressed property is affected by the property’s physical condition. Well maintained properties tend to sell at a lower discount than is the case for properties in poor condition. The unweighted average price discounts to market are presented for the current survey month as well as the 12 month period from December 2011 through November 2012. REALTOR® respondents reported price discounts for distressed houses with above average condition at about 13 to 15 percent, and price discounts of 34 to 38 percent for the properties in the poorest condition.
Based on information from the latest REALTORS® Confidence Index survey, 24 percent of respondents reported selling distressed property (foreclosed and short sales), down substantially from what had been the case a year or two ago. Cash sales accounted for roughly 40 percent of distressed sales (39 percent in August 2012).
What Does This Mean for REALTORS®? The shadow inventory, consisting of properties with mortgages about to enter default, has been mentioned in recent years as a major concern. In fact, availability of inventory available for sale — both distressed and non-distressed — continues to be limited, and distressed sales are declining. Inventories of homes for sale have declined to the 6-month level and in some areas are significantly less. The measured pace of the release of distressed properties to the market has bolstered housing prices.
Thinking, Fast and Slow is a book written by a psychologist who won a Nobel Prize in Economics several years back. Daniel Kahneman, the author, pokes at the basic economists’ assumption that people make rational calculations before deciding.
His idea is that all of us have two brains: calculating and impulsive. The “impulsive” reasoning is developed over years of unique personal experiences to help reduce the cost of mental calculation. But the impulsive decision, though less taxing on the brain, could lead to misjudgment at times.