What happens after the last short sale?

In the month of May, 9400 sales occurred in Maricopa County. Of those sales, I count 1190 short sales, and 915 bank or HUD owned homes. Distressed inventory made up fully 25% of all sales.

Foreclosure filings have been on a steep descent for quite some time now, down from a high of over 10,000 new trust deed sales filed a month, to 4500 a year ago, to under 2000 currently. In May, there were 1600 new filings, with 1200 cancelled sales, and 1000 actual foreclosures. These ratios have been relatively constant, so we can predict that roughly 40% or 640 eventual foreclosures were added to the future in those 1600 new filings, while 1000 actually occurred, clearly, an unsustainably high rate given the paucity of new filings. The actual number of homes in foreclosure dropped by 650 on the month, and is now poised to go under 10,000 for the first time in 7 years. It is nearly back to pre bubble levels.

It seems that banks have moved the dispossession of their troubled inventory largely from actual foreclosures to short sales. So, the short sale number bears watching as an important market statistic.

In July 2012, I first began tracking short sale numbers on the Maricopa County MLS, to document their numbers. At that time, there were 1101 active short sales, 10689 pending or under contract (UCB). Today, we find 630 active short sales, and 4560 pending or under contract. Short sales have dropped by 50% in less than a year. So, absent a sudden increase in short sale listings, it seems quite clear that we are going to see a steep drop off in both short sales, and foreclosures in the near future.

How will the market change, when short sale + foreclosure sales drop to less than 10% of the monthly transactions?

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About robertoaribas

Math professor, Realtor. 12 years of buying, selling, investing and managing rental properties. rock-climbing and salsa dancing. robertoaribas@gmail.com
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