I stumbled upon a great article today, they made a wonderful analysis of the nation’s short sale market:
“Short sales have been, and will continue to be, a necessary part of the mortgage industry as it seeks stabilization. Historically, borrowers that were no longer able to sustain their mortgage payments were foreclosed on by the lender…
..Either situation devalues the property substantially. In addition, there are the legal costs associated with the foreclosure process.”
This article was inspired by the latest short sale report by CoreLogic.
Short sales around the U.S, has nearly tripled the past eight quarters, and I can tell you from experience that all those short sales do not sell on time to stop foreclosures — countless homes reached foreclosures for one reason or another.
You might be surprised to hear that from someone who owns this site, I prefer short sales over foreclosures. ANY DAY. Why?
- Big losses may be incurred in both the foreclosure and short sale options, but the overall negative impact of a short sale is typically less than that of a foreclosure.
- Foreclosures drag the whole neighborhood’s value. One begets the other (s).
- It’s better for the economy because the more home prices falls, more homes will default on their loans. And that is never a good thing.
In general, all parties fare better when a foreclosure is prevented. But as the referenced article suggests, reality is, the more short sales we get, the more foreclosures we will be seeing, especially in Reno and Sparks. Nevada is still the top 3 foreclosure states in the U.S., that is not to say that we don’t have enough buyers , because we do!
But these is no end in sight for distressed properties.
Some other highlights from the article:
“The need for short sales will continue. At present. CoreLogic data shows 23 percent of all mortgages in the United States have negative equity, i.e., the homeowner owing more than the property is currently worth. In some states, such as Nevada, that number may be as high as 65 percent.”
The bottom line is even though the worst is behind us (in my opinion), we came from a very bad fall. The market, though recovering, is still badly fractured and it’s going to take a while to fully recover.