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As We Were Saying…

Several months ago, we explained that there would be an opportunity to sell your house at a higher price in the first quarter of this year than you could later in the year. Our believe was that the robo-signing mess would delay foreclosures coming to the market and that your home would sell at a higher price before these distressed properties became your competition (foreclosures sell at a 41% average discount). The numbers are now in and what we projected is in fact taking place.

Clear Capital released its monthly Home Data Index last week. In the report, they explained:

(Our) Home Data Index shows that U.S. home prices stopped declining in early January and have posted their first uptick since mid-August 2010.

“This recent national change in price direction is encouraging for the overall housing sector,” said Dr. Alex Villacorta, senior statistician at Clear Capital.

“This uptick is the first non-incentivized change in prices we’ve seen since the downturn began, and could provide great opportunity for buyers, sellers and investors alike. Although many markets still remain under significant downward pressure in light of increased distressed sale activities, it is clear that the severity of the downturns observed in October and November have subsided.”

It seems prices have stabilized and, in some markets, are perhaps even showing appreciation. However, before we get too excited let’s take a look at the reason this is taking place. According to Clear Capital:

…it is still too early to determine whether this current uptick in home prices is a temporary reprieve or the start of a sustained recovery…

Why? The number of distressed properties coming to market slowed dramatically in the last quarter of 2010.

…every spike in REO saturation (REO saturation calculates the percentage of real estate owned properties sold as compared to all properties sold in the last rolling quarter) has corresponded with a decline in home prices, and vice versa. The most recent rolling quarter for REO saturation has slowed considerably after gaining 3.2 percent during Q3 2010, with national REO rates only climbing 1.4 percent. A decrease in REO saturation indicates that an increasing proportion of fair market transactions are occurring, and as the level of distressed transactions decrease, prices tend to increase since the overall market value for an area is less affected by distressed comparable sales. If this observed negative correlation persists, a leveling off of the national REO saturation rate could indicate that home prices are poised for further gains well ahead of the seasonal spring lift.

As we explained months ago, there is a window of opportunity to sell before a large number of discounted properties go up for sale. This opportunity will last for the next 60-90 days. By then, banks will have fixed many of their paperwork challenges and again start releasing distressed properties to the market.

Bottom Line

If you wish to sell in the next twelve months, do it now. You will get a better price today than you will later in the year.

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2 replies
  1. Rob Jenson
    Rob Jenson says:

    Agreed. In Las Vegas, the market is still pretty soft and foreclosures can still destroy neighborhood comps and values. Yesterday, USA today reported Las Vegas at the top of the list with over 70% of homeowners upside down. Sell while the interest rates are still good. Remember, when rates go up, which they will eventually, it will also decrease the buying power of most buyers. This means there will be less people able to buy your home. So when supply goes up and demand goes down, that is a recipee for lower prices.


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