When the housing crisis began nearly five years ago, one of the main concerns was that the backlog of foreclosed properties were all going to hit the market at the same time, but this has not materialized as suspected.
According to the September Home Value Forecast released by Pro Teck Valuation Services, there will not be a flood of foreclosure housing stock available in cities across the nation.
“With regard to the U.S. foreclosure inventory, there has been a misperception that it is a problem for the entire market. In fact, it is quite concentrated in specific cities and neighborhoods,” said Tom O’Grady, CEO of Pro Teck Valuation Services based in Waltham, Mass. “For this reason, potential buyers who have been waiting for bargain prices in desirable neighborhoods may be disappointed.”
For example, Pro Teck said that the best performing markets, where active listing counts have declined over the past year therefore resulting in higher home prices because of bidding wars, were located in Southern California, Texas and Maryland.
“It is interesting to note that all of the metros in the top 10 are exhibiting positive trends and that all have experienced significant declines in active listing counts over the past year, resulting in fewer months of remaining inventory and tighter markets,” said Michael Sklarz, principal of Collateral Analytics and contributing author to Home Value Forecast.
Pro Teck said the top four markets that have had positive real estate trends over the last year were all in California. Currently, the overall months of remaining housing inventory for San Diego, Orange and Los Angeles is below five months. This is the lowest they have been since the market peaked in 2005-2006.
“This is significant because in the Los Angeles market over the past 25 years, whenever this indicator was below five months, the median price increased by close to 19% the following year,” O’Grady added. “Of course, it remains to be seen if the same appreciation happens again, but all Los Angeles market indicators are moving in a positive direction.”
While all three California counties exhibit low overall inventory remaining, the forecast shows supply levels still vary based on home value on a price per square foot living area basis. For counties that have homes in which the price per square foot is less than $550, there is less than six months of remaining inventory, Pro Teck said. Conversely, properties with higher values based on price per square foot have a greater supply of remaining inventory available for the market, especially in San Diego.
Meanwhile, the forecast said seven of the 10 worst markets that continue to have double digit months of remaining distressed inventory are located in the Northeast, led by New Haven-Milford, Conn.
Sklarz said there is some optimism to look forward for, as “a number of the bottom metro areas have a fair percentage of trends moving in a positive direction, which is quite different from a year ago.”
