Foreclosures, REO Pressuring Home Prices in Many Key Markets: Report
As REO listings flood key local housing markets throughout the nation, it's clear that the glut of bank-owned real estate is not only building up overall inventory, but also pushing down prices as well. A new report Friday from real estate analytics firm RadarLogic confirms that trend: in 25 tradeable MSAs, only three markets showed price increases during Febraury, and 22 showed declines on a year-over-year basis; however, ten MSAs posted price increases from January to February, and nine of those still show a positive 30-day trend. RadarLogic publishes a set of housing prices, on a per-square-foot basis, that serve to drive the Residential Property Index, or RPX; the RPX is one of the tradeable property derivatives out there (the other being the Case-Shiller based housing futures). Most tend to think of the effect of foreclosures and REO in an aggregate sense; they're not good for neighborhood stability, are prone to investment activity and flipping, and tend to drag prices down as a result. And, of course, as any amount of housing inventory rises and sits on the market longer -- REO or otherwise -- downward pricing pressure tends to result. All of which, of course, is true. But RadarLogic's monthly housing report delves into some interesting analysis that finds an REO effect of an entirely different sort: bank-owned homes now tend to be discounted so heavily relative to the rest of the housing inventory, that in markets where REO has become prevalent enough, a pretty large divergence now exists between bank-owned sales prices and everything else. http://www.radarlogic.com.