Cheap Homes Selling Faster, But Not Anything Like Before

Hey Rich,
Here’s a comment
Hey Rich,

Here’s a comment that Matt Battiata made to KPBS today:

“…Well, you know, there are – what we’ve seen in the last few months is that there’s been news come – that’s come out in the media that, you know, for a particular month the median price has tracked up by a percentage point or – and so forth, which is new because it hasn’t happened over the last handful of years. But, unfortunately, there’s a lot of false, you know, I’d call those false positives. Just because the median price bounce – you know, might in – actually go up by one or two percentage points in a given month, unfortunately is not cause to say, you know, the bad – you know, the good times are back and that the residential market has recovered. The reality is in San Diego County, we’ve dropped, really, the reality is, about 50% because you have to remember that when the bank takes back a property as a foreclosure sale, a trustee sale at the courthouse, typically what happens is the bank forecloses on your home, you owed $700,000.00 on it. They start the bidding, not always but usually, at $700,000.00 and no one’s going to bid $700,000.00 on your house because it’s not worth anywhere near that. And so what happens is, no one bids on it, the bank takes it back. That becomes what we call an REO, a real estate owned by the bank. The County Recorder’s office records that as a sale at $700,000.00…”

Now I had NO idea that these figures may be at play in “boosting” the local median…Can you verify?

Yes…Here’s the second part of Battiata’s (who’s business IS real estate) response which seems to indicate that these figures may be at work in boosting sales numbers as well…

“…Now, obviously, that’s the exact opposite of a sale, number one, and it sure as heck is not a sale at $700,000.00. So when DataQuick pulls the numbers, they factor that $700,000.00 sale into the median price. So when you have lots and lots of foreclosures, guess what? It looks like there were more sales than there were in previous months and it also looks like the median price has gone up a little bit because those numbers are not accurate. So when we have – You know, we’ve had several – We’ve had more than – We’ve had three or four moratoriums that have gone into effect, foreclosure moratoriums. There’s a huge, huge, number of residential foreclosures that are still coming down the pike. They’re going to be around in San Diego County until, I would say, 2013. There’s also a huge number of short sales that are coming because there’s a lot of people who bought at the peak of the market. There’s also a lot of people who refinanced and pulled their equity out at the peak of the market. So for – until the values in San Diego come back up to 2005 and 2006 levels, which is going to be, unfortunately, quite a while, anyone who needs to sell, they’re being – their job is getting transferred, they’re moving out of the city, they’re getting divorced, they lost their job, whatever the reason is, they’re going to be a short sale and short sales and foreclosures put a lot of downward pressure on real estate values. So I would say at the bottom of the market, yes, we’re – we are kind of bouncing around the bottom, we’re getting close to the bottom. The upper end, you know, we’ve got more to go, unfortunately. But the reality is, you know, we’re not at the bottom. It doesn’t mean that it’s not a good time for a first time buyer to go out and buy because there’s a lot of positive factors as well. Interest rates are low. You know, it’s much more affordable, etcetera. But it’s really just not accurate. I don’t see how anyone can look at this market and look at all the data and say, you know, like – like I think the Association of Realtors said recently that, gee whiz, we’re at the bottom and we’re going to start rocketing up. It’s just not accurate…”

Thanks in advance, Rich.