What is going on with Foreclosures in Orange County
The influence of foreclosures and short sales on the housing market is minimal.
Distressed: foreclosures and short sales make up only 5% of the overall inventory in Orange County.
It is amazing how often people ask about foreclosures. Buyers want to buy a foreclosure. Investors want to buy foreclosures. Shadow inventory? Empty foreclosures intentionally held off the market? When’s the wave?
The reality is that as the interest in distressed homes has grown exponentially, the number of foreclosures and short sales placed on the market has dropped dramatically. Buyers and investors wishes for more distressed sales have become nothing more than wishful thinking. The more they ask, the less they find.
The number of homes placed on the market for the first six weeks of 2014 is up 4% compared to the first six weeks of 2013. That’s not a significant change. In digging deeper, the overall makeup of the inventory has changed radically. The number of foreclosures is down 70% and short sales are down 68%. Yet, the number of homeowners with equity placed on the market is up 19%. There are only 260 foreclosures and short sales that were placed onto the market thus far in 2014. Compare that to 828 in 2013 and 2,101 in 2012
It is pretty safe to say that the change is not a fluke, but a commanding shift in the market. Here’s the earth shattering headline to take away from the data:
The distressed market, both foreclosures and shorts sales, is down 69% from last year in Orange County.
The trend began a year ago. The year to year drop in comparing 2013 to 2012 was 61%. It was jaw dropping news a year ago, which illustrates just how impressive this year’s drop is in comparison. The distressed tank is running on empty and the fuel light just came on.
Does that mean that distressed homes will vanish? Not hardly. Instead, expect to deal with these low levels for some time. There are still a lot of homes at different stages of the foreclosure process, the infamous “shadow inventory.” Collectively, banks have been slow to foreclose and slow to approve short sales. That has been an intentional strategy that, on the surface, has seemed to work surprisingly well. On average, according to Foreclosure Radar, it takes about a year in Orange County for banks to foreclose. Banks are not going to change this strategy anytime soon because it has worked. Unleashing a steady, slow stream of distressed properties has helped reignite the housing market and the overall inventory has dropped substantially from earlier in the downturn.
Now that home values have recovered impressively over the course of the last couple of years, many homeowners who were upside down have been freed from the grip of owing more than their home was worth. As a result, there will be fewer short sales, fewer homeowners walking away from their homes, and, ultimately, fewer foreclosures.
As always I am only a Phone Call 949-235-8614 or Email away.
Your Neighbor in Real Estate
Patrick J Parry