While everyone busies themselves today parsing the existing homes data from the National Association of Realtors: sales down 2.6 percent in June, inventories spiking up again to an 11.1 month supply, and prices falling 6.1 percent, I need to focus on something that wasn’t in the table of this particular report.
Realtors are now estimating that anywhere from 30 to 40 percent of existing home sales now are either foreclosure sales by banks that repossessed properties or short sales by desperate owners whose lenders agreed to take a hit on the principle of the loan just to get the home sold.
And that doesn’t even include auction sales, where banks are unloading hundreds of homes in one day at bargain-basement prices.
Think about that. That means that by summer’s end, if things go the way they’re going, nearly half of all home sales in this country will be of homes in some kind of financial distress. If existing home sales are now running at an annualized rate of 4.86 million units, that’s around 2 million homes.
I asked the NAR’s chief economist, Lawrence Yun, what to make of that:
"Well in terms of home sales activity, economic impact, people moving, its all, whether it’s foreclosed sales, short sales, normal sales, it’s all into the same bucket, so it doesn’t really matter too much because it depends upon the country. If one person goes to places like Dallas where prices are holding on, Charlotte, there’s very little short sales, foreclosed sales. If people want to buy a home in California, it will be a short sale. It will be a foreclosed sale."