There seems to be a big difference between 2 well known subscription resources for foreclosures data. The one with the largest number gets the publicity. I call BS.

Rumor has it that each NOD on each loan filed each month is counted for one of the services, some homes counted many times over.

John, average age of newspaper readership is somewhere around 70, so this is obviously not meant for you! I just don’t get how they read that 6 point type.

Thanks, Sippn, for chiming in. I see a lot of very high numbers for foreclosures that just don’t jive at all with what’s in MLS. To be fair to the other side, MLS probably lists only a heavy majority of the homes that are sold, but even when that’s discounted, the numbers still don’t match up.

Of course, what I’m addressing above is not the accuracy of the in the numbers, but what numbers you choose to focus on. Comparing the number of foreclosures to the number of sales paints a grim picture, and it’s true that the foreclosures are bringing prices down. But it also makes it sound like vast Cecil B. DeMille throngs of displaced homeowners are roaming the streets crying about their lost equity, and that’s simply not the case.

Double the numbers in this post to one in 40 and you still don’t really end up with a catastrophe. Yes, it’s a problem for that fortieth person, or for others trying to sell. But seen another way, it’s an opportunity for buyers. However, the same people who moan about falling prices are often the last people to admit that, preffering instead to have their cake (that homes were overvalued) and eat it too, (i.e., to argue that you shouldn’t buy even when they’re not).

John, your math is right, but I believe meaningless. I don’t care how many homes there are in a town. So what if 1.15% of all Sacramento area homes are in foreclosure. Give me some comparative historical statistics to measure it by. What was the percentage in 2005? 2000? 1995?

The ratio I would look at is dividing sales by foreclosures. So roughly 5% of sales is foreclosures. Still doesn’t sound like much. Seems crazy that 5% of anything could drive property values down so dramatically. What is your belief in what is driving prices down?

Sales by foreclosures is the number they used in the original article. I don’t think 5% is right. In August in Sacramento County, 25.3% of residential sales done through the MLS were REOs. the article’s point was that those numbers were increasing relative to sale numbers. In August 2006, the numbers were less than one per cent, so the numbers have gone up quite a bit.

As for how many / few things you need to drive the price down, let’s say there are 95 homes at 500,000, and 5 similar homes at $450,000. Which would you buy? Couple this with the fact that there only being buyers for 10 of these hypothetical homes per month, and I think that drives the comps down quite easily. At 25%, prices can dip rather dramatically, and indeed, the average is down 11% from August to August.

My point was that we tend to look at sale numbers, and that’s fine, but sales and foreclosures are a fraction of everything. It’s not meaningless because people tend to take the Sac Bee numbers uncritically.

My belief about what’s driving prices down is what always drives prices down: supply is outstripping demand. Tightening lending standards and fear mongering are wreaking havoc on the demand side, while defaults and rising inventory are adding to the supply.

[...] 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 [...]

I do a ton of foreclosure inspections. This is a sad state of the industry. But the silver lining is that investors are taking up the slack. It will balance out, maybe by the end of this year.

Jeffrey
IonHomeInspection.com
Houston, Katy, Sugar Land