The number of foreclosure and short sale properties available for sale in the Twin Cities has continued to dramatically fall after months of rising, as illustrated in this chart published this week by the Minneapolis Area Association of Realtors.
Perhaps even more dramatic, however, is the divide between lender-owned and short sale properties. While there are currently fewer than 2 lender-owned properties available for every buyer, there are more than 10 short sale properties available, more than double traditional homes.
This doesn't surprise me...most of my buyers don't even want to look at short sale properties because of the time and uncertainty involved.
Foreclosure properties have been repossessed and are owned by the bank...usually meaning a fairly quick response and a closing within 4-6 weeks.
Short sales typically occur when selling the home will not provide enough funds to pay off the mortgage and sellers negotiate with the bank to accept less than the amount due on their mortgage(s) as full payment. What makes these difficult is the banks won't start negotiating until the seller has an offer on the table...and then the bank can take months to approve the sale!
Not all short sale listings are handled the same way, but they often continue to collect offers until the bank reviews them months later. So in addition to waiting to see if the bank will agree to accept an offer, a buyer is not even certain their offer will be the one accepted. Especially with the first-time homebuyer tax credit expiring the end of November this is not an acceptable situation for many buyers.
Last quarter the percentage of lender-mediated sales was nearly 60%! This quarter that percentage has dropped to 44.2%, and new lender-mediated listings have also dropped....resulting in a drop in lender-mediated inventory between 16% and 22% in all price ranges except for properties priced over $500K compared to the same period last year. The number of lender-mediated properties available for sale priced over $1M increased 60%.
The percentage of lender-mediated inventory also varies by property type. While houses had the highest percentage of lender-mediated homes for sale in 2007, the lead now goes to townhomes. All three types showed dramatic jumps in 2008, but while the share of houses has dropped a bit the share of both townhome and condo lender-mediated inventory has increased.