Wednesday, August 12, 2009

Distressed Sales and Financing: Sacramento as Example

by Calculated Risk on 8/12/2009 10:00:00 AM

Just using Sacramento as an example ... I wish the NAR broke out the data like this!

Distressed Sales Click on graph for larger image in new window.

The Sacramento Association of REALTORS® is now breaking out monthly resales by equity sales (normal resales), and distressed sales (Short sales and REO sales). Here is the July data.

They started breaking out REO sales last year, but this is only the second monthly report with short sales. Over two thirds of all resales (single family homes and condos) were distressed sales in July.

Total sales in July were off 7% compared to July 2008; the second month in a row with declining YoY sales.

Sales by Financing Type The second graph breaks out sales by financing type for each July since 2002. (July 2004 was missing, June was used).

This shows the significant shift to FHA loans and cash buyers (usually investors). Speculators used conventional loans during the bubble, but now cash flow investors are mostly buying with cash.

This suggests most of the activity in distressed bubble areas like Sacramento is first-time home buyers using government-insured FHA loans (and taking advantage of the tax credits), and investors paying cash.

Investors and first-time home buyers will be buying mostly in the low-to-mid priced areas. Inventories are down in the low priced areas, but with 67% distressed sales, there will be few move-up buyers for the higher priced areas.