The trends for new “notices of foreclosure” or pre-foreclosures continue to be significant for the metro Atlanta market. Equity Depot reports that pre-foreclosures have been in the 10,000 – 12,000 range each month for metro Atlanta since mid summer. This is up from the 7,000 - 8,000 range last fall. These increases are driven by unemployment, adjustable mortgages resetting to higher levels and general economic conditions. One would expect that the inventory levels of bank-owned properties would be significantly higher… but that is not the case. Rick Sharga, SVP Marketing at RealtyTrac, wrote a recent blog post and estimated that there are at least 450,000 to 500,000 missing REO properties or “shadow inventory” as it is now known in the industry. So where are these missing REOs or bank-owned properties?
Click the chart image below to view the data for the big 4 counties of metro Atlanta – Fulton, Dekalb, Cobb and Gwinnett. Contact us if you are interested in see the data for each individual county. This chart shows some interesting facts:
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Pre-foreclosures are still very high (yellow bar)
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Properties that become foreclosed or bank-owned are significantly lower (red bar)
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Sales of bank-owned properties is higher than the rate of new properties becoming bank-owned (purple bar)
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Market sales (resales, new homes, land) are significantly smaller than the number of pre-foreclosures (green bar)
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The percentage of REOs or bank-owned properties compared to total sales is shrinking in recent months (green line).
The case is clear – REO listing inventory is shrinking. We also know this to be true from the “word on the streets” since many REO specialists do not have the listing inventory volumes they has back in the spring and early summer months. There are two root causes for this situation. One is that more banks are supporting and promoting short sales. The second is that banks are simply sitting on inventory and not bringing properties to the market for sale. Short sales make sense since it costs the bank less money to process. But why would a bank sit on inventory and not bring to market for sale? Some speculate that banks are holding assets to defer losses. Others believe that banks are using these assets to negotiate with the government to establish a “toxic bank” similar to the model used for the RTC (Resolution Trust Corporation). Only time will tell the real reasons.
So what does this mean to sellers or buyers in metro Atlanta?
For sellers, it means that you and your agent need to carefully watch the trends for future listing inventory in your local area. This includes notices of foreclosure or pre-foreclosures that will become short sales or bank-owned properties. This also includes the “shadow inventory” that banks are holding. If the banks decide to dump the inventory onto the market too fast, it will have a negative impact on market values. Yet another category to watch includes the “sideline inventory” of sellers that are expected to come into the market if values slightly improve. Right now our inventory levels are down 28% from last year. Pended sales are running at about the same pace as last year. For now, we are consuming our inventory. If that remains the case, property values will remain stable and may even pick up slightly. It is all about the balance for buyers and the current listing inventory. Prudential Georgia Realty created our award-winning Advanced Property Marketing System specifically for these types of market conditions. As the market changes, we will see the trends first and can help you optimize your value proposition to stand out from your competition.
For buyers, there are still tremendous deals in our market. There are fabulous resales, builder short sales, residential short sales and bank-owned properties. Many of these are priced below their replacement costs. It may be wise to work with a specialist who understands both the short sale and REO markets to evaluate the best opportunities. Prudential Georgia Realty has hundreds of trained and certified specialists that can help in your local area. These specialists have foreclosure searches powered by RealtyTrac plus our new custom Short Sale search. PGR is the only brokerage that provides these powerful tools to our agents.
If you want THE EDGE in the market, please contact your Prudential Georgia Realty agent to get started today!
Tags: Atlanta foreclosures, Atlanta homes values, Atlanta real estate, Atlanta short sales, Prudential Georgia Realty
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