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Deals On Foreclosed Homes Dwindling
The days of deals on foreclosures appear numbered, one analysis indicates.
A new look at foreclosure discounts by the website Zillow found that the price difference between a foreclosed house and one sold outside of foreclosure was just 7.7% nationally in September.
That foreclosure discount fell from 9.1% in September of last year. It’s also a big difference from the days of the worst of the economic crisis, when people buying foreclosed homes could expect a discount of 23.7% from the price of non-foreclosures in August 2009.
In the Los Angeles metro area, the discount was 4.2% in September, Zillow said.
The reason is that home prices have fallen so much that buyers are now willing to pay market value or near market value in some of the most competitive regions.
“The smallest foreclosure discount is found in places where competition for homes is so high,” Zillow chief economist Stan Humphries said. “People there are willing to pay the same amount for a foreclosure re-sale that they would for a non-distressed home simply to take advantage of historic affordability.”
Take for instance the Inland Empire, where the discount on a foreclosed home compared with a non-foreclosed home is just 1.8%. In the Phoenix and Las Vegas metro areas, there is effectively no discount on foreclosed homes, according to the Zillow analysis. In the Sacramento area, the discount is just 0.7%.
The number of foreclosed homes on the market in some of these hard-hit areas has also dwindled considerably over the last year. In Southern California and the Bay Area, for instance, short sales make up a bigger part of the market than foreclosed properties do, according to DataQuick, a real estate research firm.
Certain Midwest and East Coast cities appeared to have the biggest foreclosure discounts. The Pittsburgh area had a discount of 27.4%, with Cleveland at 25.8%, Cincinnati 20.2% and Baltimore 20%.