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Thursday, May 22, 2008

Foreclosure Filings Up... and Why this Might be a Good Thing

Yahoo recently reported that foreclosure filings are up 65% from last year's numbers in April nationwide. The last time we had such record numbers of foreclosures was in August 2007. While I am not thrilled about the individual effect this has on the families involved, I am glad that this is happening on an overall market scale and especially for Sacramento.

Really, you say. But aren't foreclosures bad for prices? Yes. And yes. But foreclosures are bad for prices in the short term. Foreclosures however are not bad for sales.

The real problem in the Sacramento market as I see it? Short sales. Not convinced? Okay, onto the reading material!

Here's an excellent article on Sacramento-home by John Lockwood that talks about how short sales are neither short nor sales. Elsewhere, he mentions that any given time 5% of all short sales on the market actually close escrow. I have also written before about how life would be a lot easier if banks just foreclosed on these defaulted properties. It is not the foreclosures, but the short sales that are skewing prices, often because agents are forced to list them at ridiculous prices that will never get approved by the bank in an effort to remain competitive.

Foreclosures would solve all these problems. That, and me deciding not to take on any more short sales or buyers who want to see them. With a 5% success rate, ask a sports fan - What's the odds? And I'm not the gambling kind.

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