In movies, 2007 was the year of the threequel.  Sensibly enough, Beyonce Knowles was the year’s most desirable woman (I’ve been saying that since 2006, at least).  Al Gore won the Nobel Peace Prize, while the arctic ice cap melted at an alarming rate.

In Sacramento real estate, I’ll remember 2007 as the year when those of us who entered the business early in the decade learned the mechanics of selling short sales and foreclosures. 2007 was the year of the foreclosure in Sacramento County. 

This chart shows the number of foreclosures sold month by month through November of 2007 in blue.  The short sales are shown in pink.

 

Short Sale “Time Lag”?

About a month ago, a reader responded to my post about the dismally low closing rate for short sales by remarking that my analysis failed to account for the fact that short sales take longer than foreclosures to sell.

The chart above does not show short sales lagging behind foreclosures by the 1-3 months it takes to sell them.  It shows a steady increase in the number of REOs sold.  REOs broke the 10% barrier in April, and short sales have yet to rise above 6%.  The longest short sale I’ve done took four months — sometimes we can close them in 30-60 days.  If short sales were lagging four months behind, not just failing to close, there should be at least 18% of them closing every month by now.

Another problem with this argument is this.  Yes, short sales take longer, but the short sale step also happens before the bank owns the property.  So these sales take longer, but they also start earlier, so the longer sale should be a wash, and clearly the numbers above show that it isn’t.

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