California leads, will Arkansas follow?
California is seeing an upturn in home sales, and it’s led by REO (Real Estate Owned) sales. In other words, the property the banks have taken back are being offered at a discount substantial enough that buyers think the value is there. From the post:
But don’t let that jump in volume fool you into thinking a recovery for housing is around the corner: median prices in California fell 10 percent between Dec. 2008 and Jan. 2009, to $224,000 — the lowest since May 2001, and off 41.5 percent from one year earlier. The reason? Lower-end distressed properties are moving as investors begin looking for deals amidst some of the hardest-hit areas in the state. MDA DataQuick reported that half of the drop in median prices was due to shifts in the mix of homes being sold and how those homes were being financed.
Of the existing homes sold last month, 60.4 percent had been foreclosed on in the prior 12 months. One year ago, it was 29.6 percent. In other words, REO continues to drive real estate trends throughout much of the California housing market.
Hopefully that will be the case here in Arkansas before too long. Not because I want banks to lose money, but because it allows a floor to be set on the value of housing inventory. Once values are re-established, some of the fear of continually falling prices that is keeping money on the sidelines will recede.
REOs usually aren’t marketed as such at first, because buyers are almost certainly going to offer a much lower price if they know the bank is the owner. These sites, NWAfiresale.com, and NWAbankowned.com have received some press in the Arkansas Business Journal with their marketing of REO property and are a good place to start if you’re looking for bargains.
I will hopefully have more info on REOs in the next few weeks, as I am trying to get feedback from some bankers I know regarding the various regulations that apply and the thinking behind a bank’s decision to accept an offer.