More Foreclosures in 2010 Mean Opportunities for Bargain Hunters
As housing experts continue to debate when or whether housing will finally turn around for good in 2010, the one thing most agree upon is that foreclosures will continue or even outpace last year.
And that will mean more opportunities for bargain hunters.
A full third of home sales in December were of "distressed properties," so either foreclosure or short sales. The latter is when the bank agrees to allow a troubled borrower to sell the property for less than the value of the mortgage.
"Overall, foreclosures in 2010 will be just as high as we saw in 2009," says Lawrence Yun, Chief Economist for the National Association of Realtors. "But the key factor is whether the buyers are ready to purchase distressed sale properties, and right now we are seeing that they are."
As with any other facet of real estate, buying a distressed property can be more or less lucrative depending on the local market. One might think that markets with a higher rate of foreclosure would offer the best discounts, simply due to a high level of foreclosure sale inventory, i.e. simple supply and demand.
But in some markets, like Las Vegas, banks are holding on to foreclosure inventory in order to keep prices from plummeting. By slowly releasing properties, they can create bidding wars.
Foreclosures make up a whopping 74 percent of all sales in Las Vegas these days, according to a new survey by Zillow.com, but they only offer a 23 percent discount off non-foreclosures. That's because, again, the banks are controlling inventory.
In Pittsburgh, on the other hand, you get a much better discount on a foreclosure: 59 percent. That's because in Pittsburgh foreclosures only make up 10 percent of total sales, so banks are releasing them as they get them. There's just no competition for foreclosures.
Other markets offering big foreclosures discounts are Cincinnati, Ohio, Columbus, Ohio, Minneapolis-St. Paul and Denver, according to Zillow.com.
That's the picture now, but the looming question is how these numbers will change as foreclosure moves away from being just a big problem in the former housing boom markets to a more national problem based entirely on job losses, rather than faulty mortgage products.
Already the segment driving foreclosures has moved from subprime to prime loans. Even areas like the tony Hamptons, out on the east end of Long Island, New York, are seeing big jumps in delinquencies and foreclosures.
Realtors believe there is plenty of demand for foreclosures, but it's mostly from investors. No question the dynamics are changing, and so too will the deals.
Calculators and Advice from Bankrate.com:
- Compare Mortgage Rates Nationwide
- Struggling to Save Your Home? Get Help Here