Housing Prices Show Pain of Foreclosures and Short Sales

Downside of the real estate correction sheds light on how out of kilter the market had become.

Palm Coast, Florida – February 22, 2009 – Short sales and foreclosures are not representative of all home values. They include properties that have deteriorated from neglect or been trashed by disgruntled owners or tenants. But the sheer number (66% of all January sales) has dragged median selling prices to levels well below intrinsic values. I suspect the downward spread mirrors the amount of price bloat of the 2005/2006 bubble.

Distressed home sales (foreclosures and short sales) represented fully 2/3 of January’s total MLS sales in Flagler County. Analysis of these transactions reveals the extent to which prices have adjusted. I looked at the selling price, 2007 appraised value, and 2008 appraised value as well as the price and date of the most recent previous sale. The difference between the selling price and the most recent previous transaction is most dramatic where the previous sale was in the 2004 to 2007 timeframe.

The following table represents only distressed sales. Lender-owned sales are noted with a "L" while short sales are noted with an "S." Remember that assessed values have a one-year lag time. 2007 assessed values are based on 2006 sales. 2008 assessed values are based on 2007 sales. Similarly, the next year’s (2009) assessed values will be based on 2008 sales. They are expected to drop by as much as 20%.

**Flagler County Distressed Housing Sale Prices**
Selling	2007	2008	Last	Last	Sale
Price	Assessment	Assessment	Sale Date	Sale Price	Code
$65,500	$134,937	$116,075	2005	$159,700	L
66,000	151,198	157,527	2006	220,000	L
69,900	126,091	105,635	1998	76,900	L
91,000	150,613	134,018	2002	90,800	S
93,500	134,992	113,851	2004	118,900	S
95,000	154,048	140,325	2005	182,000	S
97,500	145,048	128,659	2004	141,400	L
100,000	151,846	152,971	2005	177,000	L
101,000	154,191	142,029	2005	185,900	S
105,000	142,692	125,685	2004	130,000	S
109,000	176,480	155,563	2005	192,000	L
109,900	149,224	134,300	2006	208,000	L
110,000	143,417	127,070	2005	192,000	L
111,000	167,122	149,115	2006	228,500	L
115,000	165,466	144,545	2005	144,900	L
119,000	151,999	137,123	2004	183,000	L
120,000	190,811	176,070	2006	239,900	S
120,000	185,274	157,887	2006	259,000	S
120,000	161,657	141,481	2006	212,000	S
125,000	165,355	143,035	2002	131,900	S
127,000	198,626	174,866	2005	235,000	S
130,000	165,863	149,375	2005	151,900	S
133,650	190,432	174,934	2005	234,400	L
135,000	183,405	162,783	2006	227,700	S
135,010	190,225	164,043	2006	250,000	L
137,000	184,480	161,130	2005	259,900	S
140,000	202,017	177,851	2006	275,000	S
145,000	190,998	177,785	2004	215,000	S
145,000	245,881	216,338	2006	355,000	S
150,000	222,362	198,204	2005	253,400	L
155,000	232,447	206,082	2005	218,900	S
159,900	232,295	216,564	2005	215,900	S
161,000	227,576	210,680	2005	218,900	S
170,000	265,602	246,663	2003	228,000	S
175,000	245,571	222,624	2006	350,000	L
180,000	252,304	252,807	2007	400,000	S
200,000	340,752	295,616	2005	475,000	L
215,000	242,823	194,573	2006	290,300	S
224,500	314,873	293,085	2003	309,000	L
300,000	454,125	372,362	2006	575,000	S
520,000	1,124,171	1,062,798	2000	455,000	L

Median sale prices of distressed properties in January were 30.75% below their 2007 median appraised value and 21.18% below the 2008 appraised value.
Median sale prices were 41.98% below the median price of their most recent previous transaction.

It has been conventional wisdom that real estate can lose up to 10% of its value at the trough of a typical real estate cycle. Obviously, the current cycle is atypical. Many are now upside down in their homes because prices are now well below their acquisition cost. Others who bought longer ago, may still be upside down because they used their increased equity like an ATM machine, cashing out with home equity loans or by refinancing. In either case, there is obviously a lot of pain out there for sellers. But for every distressed seller, there is an opportunity for a savvy buyer.

Recent sales numbers indicate that there are sufficient buyers at hand. In fact, the number of contingent or pending sales in Flagler County as of 2/22 was 377, up by 90 since the first of the year. At the same time, the number of homes available for sale (MLS) in Flagler County has dipped below 1,800. In the fourth quarter of 2007, over 2,600 homes were available.

Housing Prices Show Pain of Foreclosures and Short Sales

Downside of the real estate correction sheds light on how out of kilter the market had become.

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Is this legal?