April 2012 Market Update
What Properties Are Actually Selling? And For How Much?
Phil Buoscio – Managing Broker
I want to report to you on Lender Mediated closings. Let’s break down sales numbers from February 2011, compared to February 2012. “Lender mediated” refers to whether the seller’s lender needed to approve or be part of the sale. The 3 categories the report breaks down are traditional sales (owner has equity), REO (bank/lender owned) and short sales (owner has no equity and needs lender approval to sell). I’ve included some of the charts and graphs below.
56.8% of sales in Feb. 2012 were short sale or REO
Short sales increased 72.8% from Feb. ’11 to Feb. ’12
Median sales price on short sales was 41% higher than REO sales
Traditional sale median value increased 8.5% from Feb. ’11 to Feb. ’12 (This is a “leveling” off of the market)
While most of the information didn’t surprise me, the above 4 points I felt were important for seller’s out there to know they must price right to sell.The fact that short sales and REO properties are making up 56.8% of the closings in the Chicago market means that owners who want to sell and owe more than their home is worth have hope if they have a hardship/mobility issue (i.e. need to move for a job). As you can see in chart 1 below, short sales and REO’s only were 10% of the market back in 2008. Part of the reason for this rise is the dramatic increase in short sales over the last 2-3 years. Just comparing Feb. ’11 to Feb. ’12, closed short sales increased 72%. This also means that short sales are more frequently approved and closing.
The other important stat was the median sales price difference between short sales and REO’s. I know I mentioned in other newsletters that short sales net banks more money then selling these properties through foreclosure. The proof is in the data here. The median sale price in Feb. ’12 for a short sale is $110,000 compared to $65,000 for REO’s. This is a 41% difference in sales price. It’s clear that a short sale is better for values and the lender. Which makes it logical for lenders to start pursuing more short sales over foreclosure.
The final point I wanted to make was regarding the traditional sales market. These are properties where the owner has equity and is willing to sell. The median sale price from Feb. ’11 to Feb. ’12 increased 8.5%. There could be lots of reasons for this increase, but the increase itself is not all that important in my opinion. If you look at chart 2 below, you will see that traditional sales and lender mediated sales don’t seem to have a pattern of effecting each other. Both kind of jump up and down a little, but seem to stay on the same trajectory starting in 2009. In my opinion this is further evidence that we need to burn through this inventory of lower priced short sales and REO properties. While they do effect overall market values, these are discounted properties that are going to continue to be discounted until they’re gone. The value of these discounted properties will start to rise once the inventory is reduced because there is a short of supply of these cheap properties. That’s when you will start to see the brown line in chart 2 come together with the blue line for traditional sales.
If you or someone you know is looking to sell their home, please have them contact me. I handle a wide variety of transactions including traditional sales, short sales and REO’s. I can tell you if there’s equity in your home and how much you can expect to sell for. If you happen to owe more on your home than it’s worth, I specialize in short sales and can help navigate through the sometimes confusing short sale process. Please call me at 312-953-6725 for a free and private consultation. Or you can email me at email@example.com If you want to do some research before contacting me, please visit my web sites:
For Short Sales: www.ShortSaleSuperMan.com
Better Living Realty: www.BetterLivingRealty.com