As our spring market gets into gear, I’m noticing a trend with some homes that have been on the market through the winter. Some homes in Aurora and the surrounding Fox Valley area are being cancelled as home owners decide that staying put is a better option than reducing price beyond a certain threshold. However, an alarming number of these homes are also turning into Short Sales, Pre-foreclosure or Foreclosures. Usually this status change is accompanied by a massive drop in list price – often $30,000 or more. While we remain optimistic about the market in 2008 returning to a more balanced state, the continuing number of pre-foreclosures and foreclosures entering the market isn’t a good sign.
For homeowners trying to sell homes, pre-foreclosure “short sales” and traditional foreclosures represent two of the biggest obstacles to selling homes. As soon as even one of these properties hits the market in a certain area, it impacts all of the other homes in the area dramatically. Suddenly, buyers see the same home that you’re trying to sell down the street priced $30,000 less. Even if the condition is worse than yours, buyers feel that that’s what the home should be selling for. For many sellers, reducing price to compete with foreclosures and short sales is impossible. Worse, often these foreclosures are in decent shape – not like the nightmare properties we sometimes imagine when we think foreclosure. If you can’t compete with the other homes in the market on price, and the conditions are fairly comparable – cosmetics aside – the only thing left is to count on your REALTOR to bring in a buyer directly and hope that that buyer doesn’t notice the other home down the street priced significantly less than yours. In today’s world of informaiton availablility, this isn’t a very realistic hope.
What results is a situation where you just have to wait and hope the foreclosures in your area sell quickly. However, in places where there are 3 or 4 of these properties and not that much market activity, this could realistically extend market times by months, assuming of course that no other foreclosures enter the market during that time frame.
It’s an ongoing cycle that many subdivisions are facing in this market. The question is: will spring bring enough activity to clear the foreclosures and allow homeowners to sell also? Another big question is: how will government intervention help forestall some of the foreclosures entering the market? These are serious questions that we need to pay attention to as we head deeper into spring and issues that I will be keeping an eye on in order to best advise my clients.