Headlines – Week of February 27, 2011
March 8, 2011
5 markets with the largest price drops
According to a ZipRealty survey that analyzed MLS-listed properties in 26 markets, the number of homes where sellers have cut their asking price is up 17.6 percent.
The survey indicates that in more than half of the surveyed markets, sellers are averaging at least two reductions in price as inventory has grown throughout much of the year. Sellers facing pressure of more buying options seem to be discounting to attract buyers resulting in list prices being cut for over 46 percent of the homes.
The median reduction amount has averaged 1.7 percent or $19,088.
Florida leads the nation in the largest percentage discount off the original list price, with Orlando (12.5 percent discount), Jacksonville (12.1 percent), and Miami/Fort Lauderdale/Palm Beach (11.9) leading the pack.
The top 5 markets with the largest overall median price reduction in absolute dollars include:
1. San Francisco: $32,500 median price reduction
2. Orange County, Calif.: $31,000
3. San Diego: $29,100
4. Miami/Ft. Lauderdale/Palm Beach: $25,000
5. Seattle: $25,000
Investors Buying Cheap Homes
According to the National Association of Realtors, the median sales price for a home fell last month to its lowest level in nearly nine years but home sales are starting to tick up after the worst year in more than a decade.
The momentum is coming from cash-rich investors who are scooping up foreclosed properties at bargain prices, not first-time homebuyers who are critical for a housing recovery.
The number of first-time buyers fell last month to the lowest percentage in nearly two years, while all-cash deals have doubled and now account for one-third of sales.
Lower prices would normally be good for first-time homebuyers, but tighter lending standards have kept many from taking advantage of them.
Cash-only investors can come in and get foreclosed properties at incredibly favorable prices whereas the average buyer can’t take advantage because they simply cannot get the credit to buy.
Sales of previously occupied homes rose slightly in January to a seasonally adjusted annual rate of 5.36 million, up 2.7 percent from 5.22 million in December. That pace remains far below the 6 million homes a year that economists say represents a healthy market. And the number of first-time homebuyers fell to 29 percent of the market – the lowest percentage of the market in nearly two years. According to the NAR, a more healthy level of first-time homebuyers is about 40 percent.
Foreclosures represented 37 percent of sales in January. All-cash transactions accounted for 32 percent of home sales – twice the rate from two years ago. In places like Las Vegas and Miami, cash deals represent about half of sales.
In the three states where foreclosures are highest, at-risk homes make up at least two-thirds of all sales. According to a Campbell/Inside Mortgage Finance survey, 63 percent of sales in January involved homes that were at risk of foreclosure in Florida. And in Arizona and Nevada, a combined 72 percent of sales involved those homes at risk of foreclosure.
A major barrier for first-time homebuyers is tighter lending standards adopted since the housing bubble burst as banks require buyers put down a larger downpayment. The median downpayment rose to 22 percent last year in at least nine major U.S. cities, according to a survey by Zillow.com.
Many potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further. High unemployment is also deterring buyers.
A big obstacle to a housing recovery is the glut of unsold homes on the market. Although those numbers fell to 3.38 million units in January, it would still take 7.6 months to clear them off the market at the January sales pace. Most analysts say a six-month supply represents a healthy supply of homes.
Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.
Posted by Scott R. Lodde