The Rise and Fall of Short Sale Discounts

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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Related News
Now Is The Time To Move on Short Sales
Short Sales Hit Three-Year High in First Quarter
5 Steps to Buying a Pre-Foreclosure (Short Sale)

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