March 23rd, 2010
How “distressed” is the Boise Market?
While the national headlines give many indicators of where real estate is headed it is important to remember that real estate is local and what plays in Peoria or Phoenix typically won’t be relevant to the Boise metro area.
One area that is of interest to many who watch the market is how dominant a force “distressed” sales have become in driving prices and activity in our local market. For the purposes of this discussion a “distressed” sale is any transaction involving a property marked by the listing agent in the IMLS as “possible short sale”, “in foreclosure”, or “REO-Bank owned”. The raw data comes from the Intermountain MLS (IMLS), but a local appraisal company, Hennessey Appraisals, has compiled and reformatted the data into a more easily digestible form and I would like to share and discuss some of that information here. So how “distressed” is the Boise market?
14 month summary for Ada and Canyon Counties showing distressed and “typical” sales
Source IMLS & Hennessey Appraisals
What really stands out in these numbers, besides that they are very high, is how dramatically the percentage has risen since January 2009 and that since reaching very high levels in the spring of 2009 there has been little if any retreat in the percentages. If one looks at the latest data broken down by area within the Treasure Valley you can begin to see where the highest concentrations of distressed properties are. Some of this data is misleading however due to the small number of closed sales in a particular area. However the pattern supports the theory that more established areas closer in to Boise show fewer distressed sales than areas south and west of the city that were built up primarily during the last boom. Possibly more of the homes in those areas were originally purchased using sub-prime lending or by investors and speculators.
Source IMLS & Hennessey Appraisals
With a few exceptions the areas that have had the highest percentage of distressed sales also have suffered the largest drop in prices. While Ada County average sold price has dropped 11.8% in the same 14 month period as the distressed sale data covers, in the areas of the county that have seen higher percentages of distressed sales the drop in prices has been steeper. Star (76.2% distressed sales) prices have dropped 21.8% in the 14 month period, while Eagle (67.9% distressed) has dropped 23.8%.
In Canyon County the overall rate of sales price decline has been 18.2% over the last 14 months while 69.6% of all closed transactions in February were distressed. In Nampa (72.7% distressed) average sales prices have dropped 23.3%.
Another trend starting to occur throughout the valley is buyers gradually shifting away from short sales and towards REO and “typical” listings. In the short term this is being propelled by buyers trying to beat the April 30 deadline for federal tax credits, knowing that it is unlikely that a short sale offer will be accepted in time. This has led to an environment where multiple offers, bidding wars, and sold prices over asking are somewhat common on bank owned properties particularly at the entry level. As an example, in Ada and Canyon counties since February 15, of the 1084 properties that have gone pending 400 (37%) of them have been REO’s and 122 (11%) short sales. However of the active inventory of 6270 listings, 1877 (30%) are short sales but only 609 (9%) are REO’s . While recent REO closed sales have averaged 97% of asking prices, prices on short sale listings that closed in the same period were only 93% of asking price.
Buyers in general are frustrated by the short sale process and have found prices on REO’s in many cases just as attractive as for short sales without much of the hassle. Banks, who, under pressure from the White House, have been delaying foreclosures are expected to ramp up foreclosing on properties currently in default this year shifting additional inventory into the REO column. The new HAFA guidelines going into effect April 5 are designed to streamline the short sale process. It remains to be seen whether or not that will actually happen. Regardless, most of the experts agree that 2010 will be a year the Boise market focuses on bank owned properties. Good news for buyers. Not so great for sellers of “typical” listings who find their primary competition is distressed property and whose appraisals also tend to reflect this reality. One thing we can say with certainty– the market will continue to change rapidly and buyers and sellers, and their agents need to continually educate themselves as to the current state of affairs LOCALLY. Please feel free to contact me if you have any questions on this information or would like me to update it for you.
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