Remember double-digit discounts on foreclosure properties?
Fuhgedaboudit.
Homebuyers in September enjoyed only a 7.7 percent discount on bank-owned properties compared to 9.1 percent a year ago and nearly 24 percent in August 2009 when the housing market was at its worst.
Dwindling supplies in both the traditional market and the distressed market has narrowed the gap, according to a Zillow analysis.
That means if you waited to buy a home, for whatever reason, you'll soon pay as much for a distressed property as you pay for a traditional sale.
Rethink that waiting strategy.
"The smallest foreclosure discount is found in places where competition for homes is so high, people there are willing to pay the same amount for a foreclosure re-sale that they would for a non-distressed home simply to take advantage of historic affordability," said Zillow Chief Economist Dr. Stan Humphries.
"Additionally, in areas such as Phoenix and Las Vegas, where not long ago one out of every two homes sold was a foreclosure re-sale, buying a foreclosure is no longer just for investors," Humphies added.
Zillow said some of the same areas hardest hit by foreclosures during the housing crisis were areas where the price gap between foreclosed and non-foreclosed homes were the smallest in September.
Take Phoenix and Las Vegas where there was no difference, Sacramento, CA (0.7 percent difference) and Riverside, CA (a 1.8 percent difference).
Larger discounts can still be found in Pittsburgh (27.4 percent), Cleveland (25.8 percent), Cincinnati (20.2 percent) and Baltimore (20 percent), but those areas are shrinking.
The culprit is low inventories due to sellers staying out of markets that don't pencil and fewer distressed inventories.
Sellers who can't sell at least for the balance of their mortgage, plus the cost of the transaction, but who can still afford to pay the mortgage, simply aren't coming to market.
The latest Campbell/Inside Mortgage Finance says its market sources believe major banks are keeping many REO properties off the market this year, with traditional seller-hopes for getter more next year and that's contributing to fewer homes for sale, resulting in higher prices on all homes.
Campbell's HousingPulse Distressed Property Index (DPI) for October tracked the share of distressed properties in overall home purchases. It fell to 38.6 percent in September, a record low.
September was the fifth month in a row that the DPI fell and is now down more than 10 percentage points from the near-record-high 48.7 percent level recorded in February this year.
Zillow said those year-over-year foreclosure discounts fell in roughly three-quarters (76.9 percent) of metro areas analyzed, and all metros are down from their peak - more than 30 percent in some areas.
Given the Zillow study reflects September prices, the "How much can I save by buying a foreclosure?" may be moot now that it's November. The market may already have achieved an equilibrium in distressed properties vs. traditional listings.
Zillow also says because foreclosed homes tend to be smaller and in lower-priced locations, prior research tends to overstate the discount on foreclosures relative to non-foreclosures.
Published: November 22, 2012
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Source: http://realtytimes.com/rtpages/20121122_listingprices.htm
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