By Jed Smith, Managing Director, Quantitative Research, Wannasiri Chompoopet, Manager, Housing Statistics, and George Ratiu, Research Economist
The existing home sales market is currently bifurcated between distressed and non-distressed sales. Distressed sales declined to 33 percent of the market in May from a high of 49 percent in March. As part of the Realtors® Confidence Index Survey we obtain data on “discount from market,” the degree to which distressed property is being sold below the market price it would otherwise command if it were not distressed. As of May 2009, estimates are subject to an approximately 3 percent survey margin of error.
- The median discount from market for foreclosures was 20 percent in May; for the time period February through May the average median discount from market was 18 percent.
- The average discount from market for foreclosures was 21 percent; for the time period February through May the average discount from market was 19 percent.
- The median discount from market for short sales was 12 percent; for the time period February through May, the average median discount from market was 14 percent.
- The average discount from market for short sales was 17 percent; for the time period February through May, the average discount from market was 18 percent.
One issue raised by Realtors® is that of buyer confusion in terms of home values, most succinctly phrased as “Everybody wants 50 percent off due to foreclosures.” In fact, non-distressed property is actually commanding a premium relative to distressed property, other things being equal. In the case of distressed properties, real estate in physical condition that is below average market condition actually sells at an even greater discount.
“Copyright National Association of REALTORS®, Reprinted with permission.”
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