Are Foreclosures Awesome?
Are foreclosures awesome? The guys at Think Big Work Small do.
They point to the fact that as an industry, we are dependent on homes exchanging hands.
Not only do we need homes to sell to make a living, so do lenders, inspectors, title companies, escrow companies, contractors, movers, furniture stores, appliance stores, landscapers, painters, stagers, etc..
They report that in 2005 nationwide there were 7 million home sales, most of which are assumed to have not been foreclosures, while in 2010 there were only 4.9 million sales.
Of the 4.9 million home sales in 2010, 1 million were foreclosures and another 400,000 were short sales. So only 3.5 million of the sales were traditional sales, which would be the lowest since 1981 and if adjusted for population growth would be the worst real estate market ever.
TBWS's argument is that without foreclosures there would be a significant decrease in the number of homes changing hands, which would in turn have significant negative impact on the amount of money being generated in the real estate industry and all industries associated with it.
Here in Placer County, CA we have seen the number of bank owned listings added to the market fall 66% over the past year, and while we have seen the number of short sales closing improve, closed short sales only rose 8% in July compared to last July, which does not make up for the missing bank owned homes.
This lack of foreclosure inventory has lead to a lack of inventory in general and has been responsible for increasing home values, but it has also left a tremendous amount of economically stimulating money on the table.
I can confidently say that if there were twice as many homes available for sale right now in Placer County, CA, the market could easily absorb them.
The process of losing a home to foreclosure is certainly not awesome for the homeowner losing a home.
That being said, if a bunch of new foreclosures were listed in our market or if short sales were suddenly getting listed and approved at a higher rate, it most certainly would be awesome.