Wednesday, October 08, 2008

Data drill down... Bank owned vs. Traditional Seller

Earlier I had mentioned that I would be following up with some data separating all the single family units sold as either 'Bank Owned' or 'Traditional Seller' for the month of September 2008.

The following is the data comparison.

First, I wanted to compare the average basics of the sold homes between the 'Traditional Sellers' and 'Bank Owned'. I didn't find any substantial differences between the fundamental aspects of the average sales between 'Bank Owned' vs. 'Traditional Sellers' listings.

As you can see, basically the same number of units were sold last month in both categories (Bank Owned vs. Traditional Seller). Slight differences appear after that in terms of livable square footage, garage space, and age... but overall both categories align pretty closely.

Now we'll continue with the breakdown concerning price...

Let those comparisons sink in for a few.

Okay... I know you must be thinking about such things as 'condition' of the property as a reason for the disparity in the differences shown above... and absolutely... condition of average 'Traditional Seller' property is superior and therefore purchased at a premium as compared to 'Bank Owned' properties.

But I think this chart clearly says that buyers are being attracted to price, on average, more than condition. Over half the buyers last month chose to purchase a 'Bank Owned' property. The buyers that make up that half most likely include real estate investors, but I bet a fair number of buyers of 'Bank Owned' did so on affordability.

I'll share some photos from the few 'Bank Owned' listings I visited recently in an upcoming post. Yes there are challenges that face the buyers who choose to purchase a 'Bank Owned', but homeownership fundamentally should be based on affordability for buyers and these 'Bank Owned' properties are providing it... and obviously the buyers have spoken.

Here is one last comparison that points to price as a motivating factor for buyers...
The numbers say everything. 'Traditional Sellers' need almost three more months to attract a ready, willing, AND able buyer. Three more months of mortgage payments, utility bills, insurance, waiting for just the right buyer, and delaying getting on with your life after your house sells. Once either seller (Bank Owned or Traditional) enters a contract, closing the transaction basically takes the same amount of time.

I do want to reiterate that condition of the property is still important and the better the condition the higher premium should be expected. I'll have more on matters that deal with condition in another post, but for now these comparisons are striking.

There was a 30 point spread between what 'Traditional Sellers' received in dollars to part with the property as compared to 'Bank Owned' properties. The data is telling me that is too high of a spread and impeding opportunities for 'Traditional Sellers'. Keep in mind that in my Listing Report from the beginning of the month showed a total of 585 active listings... and only 76 of them were 'Bank Owned'. Yet 'Bank Owned' properties are producing more sales for the last two months than 'Traditional Sellers' are.

'Traditional Sellers' MUST get ahead of the market at this time. Until banks rid themselves of non-performing assets, they will only drive the prices further down. Folks, price adjustments are happening very quickly... the charts posted earlier are clearly showing that.

If you fall into the category of a traditional seller (or plan to soon), please keep in mind that you will be competing with 'Bank Owned' properties, as well as other traditional sellers. Expect prices to continue to decline until the banks decide to compete with you.

More information coming on this subject... tomorrow at the earliest.

No comments: