What’s Listed, What’s Selling, And What’s Not
As we saw last time we looked at Elk Grove, prices are down substantially (about 1/3) over where they were in the first quarter of 2007. As a result, unit volume is up by about 20%, with foreclosures making up some 71% of what sold in the first quarter of this year.
So where are we now? What are the prices on short sales and foreclosures in Elk Grove, and how do they compare to other types of sales? If you’re in the market, what should you be looking at? We can use Elk Grove numbers to learn a lot about what’s likely to sell and what isn’t. Is it worth your time to be focusing on short sales, or should you ignore them in favor of foreclosures?
Let’s look at the numbers. Currently there are 1221 units available in Elk Grove, and with an average of 135 units selling every month, that works out to be 9 months of unsold inventory.
Now let’s look at how that inventory breaks down. Good old, regular, non-distressed sales — where the seller has enough or more than enough equity to pay off their mortgage — make up 32% of the active inventory, or 391 units. On balance these are the largest homes in Elk Grove, averaging 2,406 square feet. They’re also the most expensive, even on a price per square foot basis, at an average list price of $212 per square foot. Statistically, some thirty-one such homes should sell in April (extrapolating from the first quarter). So the chance of one of these homes selling next month is 39 / 391, or about one in ten.
Next on the hit parade, at a list price of $147 per square foot, short sales are almost as cheap as bank foreclosures, so you might naively expect a lot of them to sell. Yet short sales don’t sell. Blame the listing agent who took the listing on a short sale that will never get approved anyway because the buyer has the money to pay off the debt and the bank knows it. Blame beaurocratic bean counters at the bank. Or blame “fickle” buyers, who change their minds after a “mere” four months of waiting. Whoever you want to point the finger at, short sales don’t sell well, which is why I make no secret of the fact that I hate short sales. 532 short sales are currently active in Elk Grove, and, extrapolating from first quarter sales, some eight of these homes will sell in April. So the odds on a short sale selling are 8/532, or about one chance in 67.
Bank foreclosures are cheaper than short sales at $143 per square foot, on average. 298 of the 1221 homes available in Elk Grove now are foreclosures — that’s 24.4%. However, again extrapolating from last quarter sales, some ninety-six of these homes should sell in April. So the odds of a bank foreclosure selling next month are about 96 / 298, or about one chance in three.
I Still Hate Short Sales, And You Should, Too
Based on the Elk Grove numbers, if you write up a short sale instead of writing up a bank foreclosure, this means:
- You’re going to pay, on average, approximately $8,500 more for the same house, assuming you get it.
- The “assuming you get it” part is really problematic here. Even though short sales weigh in at $147 per square foot versus $212 per square foot for non-distressed sales, the fact that only 1 in 67 of them will close in a given month (versus 1 in 10 for non-distressed sales) should make you think twice about short sales. I think they’re less of a plan than a pipe dream.
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