The foreclosure tsunami appears to be on its way – new defaults, re-defaults, and foreclosure numbers are rising, and there’s still the backlog of those who are attempting to loan mod that will eventually get denied.

According to foreclosureradar, there are 4,047 bank-owned properties in San Diego County, and 20,215 outstanding NODs and Notices of Trustee Sales. 

Will the impending flood of REOs depress sales and prices further?

I don’t think so.

I think an increase of foreclosures would IMPROVE the coastal market, turning it into a frenzy-like condition.  The lack of well-priced inventory up and down the coast has been very frustrating for summertime buyers, and they’d love to have a shot at buying a well-priced “bank deal”.

The banks are listing their REOs for close-to-retail too, so sales prices would only crash if they did literally flood the market with new REO offerings.

Here are a few examples for evidence that when a decent REO comes on the market.

There were 28 detached north-coastal REOs that closed escrow in the last 60 days, and their average SP/LP was 100%. Fifteen of them sold for OVER LIST PRICE:

Street Address List Price Sales Price DOM
Park $385,900 $415,000 12
Laguna $399,900 $413,000 38
Orpheus $410,000 $436,000 5
Crest $436,900 $453,000 15
Corte Loma $446,500 $448,000 2
Olmeda $479,900 $551,000 20
James $499,900 $597,000 2
Bressi Ranch $545,730 $565,000 48
Turner $559,000 $562,000 14
Contour $574,800 $600,000 34
Corte Romero $731,900 $742,000 8
Magellan $884,000 $907,000 9
Lemon Leaf $999,900 $1,008,653 18
Cam de Orchidia $1,299,800 $1,325,000 2
Corte Lusso $1,757,500 $1,787,000 8

It’s safe to say that sales will definitely improve if REOs flood the market – if the bank-sellers need to lower the price to find a buyer, they will. But frustrated buyers just want to buy a house, and if they have to pay list price, or higher, just to get a “bank deal”, they’ve been doing it. It would take a blunder by the banks – unloading hundreds of REOs at a time – to cause prices to plummet.

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Jim the Realtor
Jim is a long-time local realtor who comments daily here on his blog, bubbleinfo.com which began in September, 2005. Stick around!

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