Over the last four years Northern Nevada has been knocked back and forth by the winds of the financial markets. Prior to 2006 foreclosed homes accounted for less than 1% of the real estate market. By 2008 foreclosed/short sales were accounting for upwards of 75% of all sales, with short sales and foreclosed homes dividing the market roughly half each.
As we move from 2009 into 2010 banks want homes sold using the short sale method if possble. They still get their insurance and they get their write-offs but do not have to take possession of the property and all attendent costs. As short sales have moved to the forefront of market activity the question is raised: what will a buyer be willing to pay to buy a home that can actually close escrow in less than 45 days? Homes with good certainy that the escrow will close, versus 180 days filled with uncertainty all the way?
To answer that question I have taken the time to break down our market by traditional sales, short sales and by foreclosed sales.
By March of 2010 in the greater Reno/Sparks market, 710 homes had closed escrow:
The average price was $212,878
Traditional: 180 sold with an average sales price of $283,923
Short sales: 246 sold with an average sales price of $190,363
Foreclosed: 224 sold with an average sales price of $189,419
We are seeing an area-wide, whopping 30% difference from a traditional sale to a distressed sale. Now taking a look at a specific neighborhood, such as Sommersett, we can see a more specfic example:
Traditional: 11 homes sold for an average price of $308,384
Short sale: 11 homes sold for an average price of $279,841
Foreclosed: 7 homes sold for an average price of $259,821
Therefore, to buy a home that will close, the market paid about a 10% premium.
What about pending sales?
Northwest Reno today has 100 pending sales, 8 traditional, 80 short and 9 foreclosed.
Traditional sales in escrow are averaging $244,616
Short sales in escrow are averaging $208,000
Foreclosed sales in escrow are averaging $183,938
That means that the market is adjusting about 15% for the ability to buy a home that will close escrow.
From these three examples it can be seen that sellers that will sell as a traditional sale can, in fact, sell at higher prices. Conversely, the banks practice of short sales is costing the markets at least 15% in equities than a more sensible approach to the short sale process would result in.
Our markets have been rocked by the storm of the incredibly badly managed financial markets but without question, if leadership existed that was forward thinking, our markets could already be leveling out and even begining to move forward, but alas that has not happened and does not appear to be on the horizon.
On April 5th new guidelines will be released that may affect some of the above numbers, the question is going to be, in which way?