Where have all the foreclosures gone?
The short answer…they were bought by savvy investors and smart home buyers who knew the inventory of distressed homes wouldn’t last forever.
During the 5 year period from 2008 thorough 2013 foreclosures and short sales represented significant price discounts and a large portion of the available housing inventory. Fast forward to 2014 and we see that sales and inventory of distressed properties have decreased sharply.
For those of you who receive my daily foreclosure listing report you’ve noticed two things. 1. There aren’t as many as there were a year ago and 2. the prices are not significantly below average market value.
During the early years of the “The Great Foreclosure Crisis”, banks were pressured into liquidating non-performing assets to comply with federal regulations. This kept prices down as lenders were willing to accept steep discounts to get an overwhelming inventory of distressed properties off their books. As the ratio of performing to non-performing assets increased and the foreclosure rate dropped through the years that pressure to liquidate eased tremendously. Today, lenders are simple no longer willing to and no longer have to make big price concessions.
Another trend that started around 2011/12 was for lenders to fix up foreclosures before putting them on the market. This made the property attractive to a wider range of buyers, not just fix and flip investors, and also increased their market value. Today many of the foreclosures on the market are move-in ready with fresh paint, new flooring and new appliances.
It has become very difficult to find a good “fix and flip” property where a big discount can be negotiated for the needed repairs. The lenders have learned that they can contract out the repairs and upgrades and eliminate the middle man investor. There are still a few good deals out there but the competition for them is fierce.
Fewer distressed properties and higher prices is good news for sellers. Non-distressed sales and prices have increased steadily over the past few years are are now nearing pre-bubble levels.
Currently, around 1.6% of homes in South Carolina are in foreclosure and approximately 4% of home owners are seriously delinquent. This indicates that foreclosures and short sales will continue to be a part of the market for a few more years, but they won’t be the “bargains” they once were.