Foreclosed House Banks Are Offering Heavy Discounts
June 10th, 2008
The rising numbers of foreclosed houses are weighing down lenders. Overwhelmed by the increasing numbers the banks are now offering heavy discounts. The rates are falling so low that it appears that the bottom has been reached by harking back to the go-go days. A house that sold for $350,000 three years ago is now tagged at $175,000. The banks are now being selective in buyers allowing the houses to be bought primarily by those who can pay cash down.
In California, Florida, Nevada and Arizona this trend is most noticeable. Here the prices had skyrocketed during the boom years but now with equal speed the prices are coming down to earth. The market is dominated by vacant houses and distressed units with owners pressed to sell them at any price.
Across the nation one out of every four sales came from distressed units. There was a 50% jump of these in regions like Las Vegas, Detroit and suburbs of Los Angeles. In some divisions that have newly come up the number may be often 90%. Loose lending practices and rampant speculation have led to this foreclosure crisis.
During the past twelve months the number of bank repossessions have doubled. In April 2007 there had been 254,000 repossessions but this April there were 660,000. This is however is not the end of the tale. More is yet to come. With more foreclosed houses rushing in to flood the market the demand of investors is likely to be swamped. At least 3 million American house owners are lagging behind by a month in mortgage payments during the first quarter of 2008. Another 450,000 are entering the final foreclosure net.
On the positive side some buyers are finding the heavy discounts offered by the banks as a great opportunity to snap up a deal. But here again competition is stiff and one needs to be wary of the pitfalls. However many read the competition to be a good sign that the cloud is beginning to lift. Janice Ziesig argues that it has “actually stimulated the market”. In Orlando nearly a third of the bank repossessed house get more than one offer but many fall through and do not materialize. The sellers are in a hurry to move on while many have to pay cash to make up for the gap between the loan amount and the sale price.
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June 26th, 2008 at 2:20 pm
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