MiamiRealEstateKing

Miami-Dade: 71.9% of all Distressed Properties Sold in December, 2010 were REOs

In real estate on January 17, 2011 at 2:07 pm

In December, 2010, 64.8% of all properties Sold (in the MLS), were distressed sales (which includes Short Sales and REOs) – http://wp.me/p9Ggo-dJ

Among these, REOs Sold (closed), accounted for approximately 71.89% of all distressed properties sold in December, 2010. This is up 27.7% from November/2010 and up a healthy 52.1% from 12/09.

Unfortunately, the number of REO properties for sale and the number of new REO coming to market are both also up significantly.

December, 2010 saw a 37.1% increase over November in the number of new REO listings, also increasing the total number of REO units for sale to 2361, up 22.6% from November.

Moreover, the number of new REO listings for December, 2010 was up 84.8% from December, 2009, causing the total number of REO properties available for sale to go up by a whopping 133.3% from December, 2009.

I’m not sure about you but…if the so called “shadow inventory” is in a way, any kind of multiple of these numbers…I will venture to guess that we will be at this game for a looooonnnng time.

This market segment is so healthy that, at the current pace, with Pending Transactions (a leading indicator of future closed inventory), clipping at a healthy 21.5% from November, 2010 and up 117.3% from December, 2009, this makes this market segment shine compared to non-distressed sales or Short Sales.

In fact, the Months of Inventory based on Closed sales for December, 2010 was of 2.4 (meaning these homes are not sitting on the market long) and a very healthy Absorption Rate based on Closed Sales of 41.9 units.

Here is the challenge for those thinking they can buy an REO (foreclosed) property, if you are not able to or you are not teamed up with a professional that can help you make a snap decision about whether the property you are looking at meets your buying criteria for the level of repairs required, etc and, if you do not have cash or access to cash at the snap of your fingers, this market segment is largely, not for you.

If you are John or Jane Buyer, looking to buy your first home, these homes, by and large, need repairs and therefore, unless you are paying cash and have enough reserve funds to make all necessary repairs, it is quite atypical that you will be able to get any form of financing on any of these properties.

The only “possible” exception are, Fannie Mae or Freddie Mac REO properties that qualify for their Home Steps or Home Path lending programs. These programs typically allow owner-occupant buyers to make offers during the first 15 days the property is on the market and bars investors and any other non-owner occupants from submitting offers during this time frame. Only after the 16th day can non-owner occupant offers be considered. In addition, owner-occupants may apply for a 3% loan from these institutions and get a loan similar to FHA.

Sadly, over 90% of all REO properties sold, sell for cash since, most first-time buyers who are the bulk of this market segment priced under $150,000, do not have the means to pay cash for these properties and still have enough funds set aside for all required repairs and/or lien/violation cures and investors do. Obviously, investors pursue these because these afford them the best possibility for renting them with a positive cash-flow and/or (eventually), sell them over time to end-user buyers like John or Jane Buyer.

In addition, the Average Closed Price for REO’s in December, 2010 was $121,000 000 (down 4.9% from November, 2010 and down 7.5% from December, 2009), compared to Miami-Dade’s overall Average Closed Price of $271,000 (up 12.4% from 11/2010 and down 5.2% from 12/2009), this is a potential discount of almost 45% by buying REOs over others.

The Median Closed Price for REOs in December, 2010 was $84,000 000 (up 7.7% from November, 2010 but down 11.6% from December, 2009), compared to Miami-Dade’s overall Median Closed Price of $130,000 which was down 3.7% from 11/2010 and down 18.7% from 12/2009.. This means that, as of the things are now, buying an REO may provide an additional 64.6% discount over non-REO purchases based on the Median Closed Price levels.

Unfortunately for non-investors buyers who do not have the discretionary cash or access to it, is left looking at still dreaded Short Sale (pre-foreclosure), properties, which continue to have a very long and frustrating purchase process.

Even worse is the condo market which, more often than not, leaves buyers unable to get any type of financing in many condo buildings unless assisted by some government program since, these special financing programs are few and difficult to access.

* All reports are published January 2011, based on data available at the end of December 2010. This representation is based in whole or in part on data supplied by Realtor Association of Greater Miami and the Beaches, Realtor Association of Miami-Dade County, Realtor Association of Greater Fort Lauderdale and Northwestern Dade Association of Realtors. Neither the Board or its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Board or its MLS may not reflect all real estate activity in the market.

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