RealtyTrac recently provided some pre-foreclosure sales data to Bloomberg TV for a segment on markets with the biggest decreases in short sale discounts compared to a year ago, along with markets with the biggest increases in short sale discounts.
The point being that although big discounts are still available with short sales, those discounts may be dwindling in some local markets as rock-bottom home prices draw in buyer demand, finally forming a solid market bottom.
The two solid examples of this scenario in the top 20 with lower short sale discounts are Detroit and Washington, D.C., although it's likely that Richmond, Va., Grand Rapids, Mich., Birmingham, Ala., and possibly Oklahoma City and Des Moines fall into this category.
But that is not the case for all markets with dwindling short sale discounts. The second scenario causing the rebound is an artificial restriction of the supply of foreclosures as a result of fallout from the robo-signing scandal that came to light in late 2010. This caused many lenders to slow down the pace at which they were pushing foreclosures through the process and also at which they were listing foreclosed homes for sale. This limited supply, albeit artificial, has helped stabilize home prices, but we expect home prices to take another hit in many of those cities later this year as some of the delayed foreclosures of last year come on line.
This scenario has already played out in many of the cities with the biggest increases in short sale discounts. Many of these cities are those that have already broken through the false bottom caused by the artificially restricted foreclosure supply described above. Certainly the Florida cities fall into this category. For example, with our May foreclosure activity report, we saw the fifth straight month of annual increases in foreclosure activity in Orlando. Lenders have already begun ramping up foreclosure activity in these cities, adding more supply of foreclosures available and softening home prices once again.
Top 20 Markets with Falling Short Sale Discounts
MSA Name | Avg Sales Price | Avg Discount % | YOY Change in Discount |
Bridgeport-Stamford-Norwalk, CT | $337,597 | 30.25 | -31.64 |
Louisville/Jefferson County, KY-IN | $119,797 | 23.60 | -27.71 |
Ogden-Clearfield, UT | $128,882 | 12.42 | -26.67 |
Poughkeepsie-Newburgh-Middletown, NY | $219,260 | 7.81 | -22.75 |
Detroit-Warren-Livonia, MI | $102,203 | 1.06 | -19.84 |
Rochester, NY | $106,376 | 15.78 | -19.37 |
Birmingham-Hoover, AL | $142,253 | 5.55 | -18.85 |
Greensboro-High Point, NC | $125,642 | 2.54 | -17.33 |
Richmond, VA | $171,024 | 13.22 | -15.88 |
Baltimore-Towson, MD | $188,578 | 22.22 | -14.88 |
Cleveland-Elyria-Mentor, OH | $95,862 | 13.43 | -14.44 |
Durham, NC | $152,550 | 25.85 | -12.89 |
Harrisburg-Carlisle, PA | $128,487 | 16.30 | -10.69 |
Grand Rapids-Wyoming, MI | $94,294 | 18.83 | -10.18 |
Columbia, SC | $113,747 | 17.43 | -8.87 |
Oklahoma City, OK | $93,641 | 34.63 | -8.79 |
Des Moines-West Des Moines, IA | $108,425 | 29.69 | -7.78 |
Minneapolis-St. Paul-Bloomington, MN-WI | $167,244 | 13.48 | -6.64 |
Washington-Arlington-Alexandria, DC-VA-MD-WV | $261,518 | 31.41 | -6.37 |
Dayton, OH | $66,598 | 27.17 | -6.17 |
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Top 20 Markets with Rising Short Sale Discounts
MSA Name | Avg Sales Price | Avg Discount % | YOY Change in Discount |
Akron, OH | $82,306 | 30.32 | 24.86 |
Allentown-Bethlehem-Easton, PA-NJ | $88,560 | 47.23 | 21.26 |
Boise City-Nampa, ID | $106,058 | 11.02 | 19.90 |
Palm Bay-Melbourne-Titusville, FL | $93,615 | 23.75 | 17.53 |
Augusta-Richmond County, GA-SC | $90,248 | 34.47 | 16.01 |
Charlotte-Gastonia-Concord, NC-SC | $130,857 | 30.50 | 15.34 |
New Haven-Milford, CT | $169,376 | 16.13 | 13.89 |
Lakeland, FL | $77,751 | 10.69 | 11.25 |
Pittsburgh, PA | $91,948 | 33.01 | 10.59 |
Cape Coral-Fort Myers, FL | $99,102 | 38.58 | 10.24 |
Charleston-North Charleston, SC | $183,375 | 24.40 | 9.90 |
Omaha-Council Bluffs, NE-IA | $89,066 | 42.60 | 9.67 |
Orlando-Kissimmee, FL | $112,618 | 15.26 | 9.47 |
Tulsa, OK | $113,393 | 21.56 | 9.29 |
Tucson, AZ | $114,615 | 32.82 | 9.28 |
Baton Rouge, LA | $138,187 | 24.37 | 9.03 |
Sarasota-Bradenton-Venice, FL | $131,219 | 23.67 | 8.91 |
Springfield, MA | $108,468 | 41.52 | 8.60 |
Oxnard-Thousand Oaks-Ventura, CA | $326,744 | 18.82 | 8.38 |
Seattle-Tacoma-Bellevue, WA | $224,294 | 31.35 | 8.25 |
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