The number of foreclosures in Sacramento has been the subject of many articles and a great deal of press attention. I thought I’d take a look at a few of the areas that are experiencing a high number of foreclosures to get a feel for how many foreclosures are currently active and what sort of discount they represent for buyers.

With this in mind, I focused my research on the three areas that are showing highest numbers in the Multiple Listing Service (raw numbers, not percentages) of bank owned properties in Sacramento County. These areas the Franklin Blvd / Freeport area (95823 — see zip code map), Sacramento Florin 95828 (map), and Elk Grove 95758 (Map). In fact, when you look at the map, you can see that the choice of calling these “three areas” or “one area” is pretty arbitrary, since they roughly border one another.

The Boring News — How Many Are There?

Let’s take them as one area of Sacramento County that’s high in foreclosures first. In these three high foreclosure areas, the number of active listings that are bank owned, is 17% of the total. At the same time, 11% of the total listings are short sales — properties where the seller’s proceeds from the sale do not cover the cost of repaying the loan. So for both types of “distressed” properties, we come up with a figure of 28%. Once again, the Sacramento Bee’s summary claim that for every two homes sold, one is in foreclosure seems to overstate the case. (I critiqued those numbers from another angle here). However, to give the bee their due, here are possible reasons for the discrepancy:

• The Bee was reporting on August foreclosures and sales only, whereas my current report concerns active listings that have accumulated over some time.
• As we’ve shown earlier in one market, foreclosures outsell non-foreclosures. This isn’t hard to understand — they’re cheaper. This being the case, you’d expect the “absorption rate” for short sale and REOs to be faster than for non-distressed sales.

The Interesting News — How Much Money Can You Save?

Of course, the debate about how many foreclosures there are generates a lot of heat, but not much light. A much more interesting question is, as always: “What’s in it for me?”

If you’re a buyer, plenty!

The following numbers are all expressed in list price per square foot.

In the Franklin Blvd area (95823), short sales are presently discounted 9.2% from their non-distressed counterparts. Bank owned properties are even better, discounted an average of 15.5%. In Elk Grove (95758), the average discount for a short sale is 11.9%, while for an REO it’s 17.1%. The Florin area boasts some of the best numbers of all in this respect. Short sales are discounted 12.4%, while the average foreclosure is discounted a tasty 18.3%! If you’re willing to put up with doing whatever repairs are needed yourself, that difference is huge, and it means the difference between purchasing something at roughly $320,000 and roughly $260,000. $60,000 buys a lot of carpet and paint!

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