Home sale closure rate staggers
Quarter of houses under contract fail to seal the deal
By John Rebchook, Rocky Mountain News (Contact)
Published June 5, 2008 at 10:35 a.m.
More than one out of four homes in the Denver area placed under contract in May failed to close, according to an analysis of a monthly report on homes sold by Realtors.
The 25.81 percent "fallout rate is staggering," said Larry McGee, president of the Berkshire Group, who for the first time analyzed that aspect of the market.
He found that the rate of homes not closing is twice what it was in May 2006, when the rate stood at 13.81 percent, and 46 percent higher than the 17.68 percent rate in May 2007.
However, it is not the worst rate. In September 2007, the fallout stood at just above 40 percent and actually has declined slightly from March and April.
"It will improve," McGee said, as "consumer confidence strengthens."
"This level of fallout produces a considerable strain on both buying and selling consumers, Realtors, lenders, and the entire resale service industry," he said.
Independent broker Gary Bauer, who also prepares a monthly report based on Metrolist data, said deals that aren't consummated fall into three camps: buyer remorse, homes not passing inspection and buyers not qualifying for loans under the stricter underwriting standards.
Buyers often ask for repairs or improvements that the seller considers unreasonable or too costly, McGee said.
"The average buyer, smelling blood in the water, feels that the average seller is desperate to sell," McGee said.
Sellers are having trouble unloading homes at a time when the record number of foreclosures on the market are driving down the median and average prices.
The median price of a single-family home dropped almost 10 percent to $226,500 from $251,155 in May 2007, while the average price of a single-family home fell by 15 percent to $276,374 from $318,904 in the same period.
However, that can spell opportunities for people who previously had been priced out of the market.
Bauer said he is helping a family of five buy a foreclosed home in Commerce City for $70,000, which previously sold for more than $163,000, almost a 60 percent drop.
In 2005, homes priced under $100,000 accounted for 3 percent of the homes sold, Bauer said.
"Today, they account for about 13 percent of the mix," Bauer said. "That's what foreclosures have done to the market."
rebchookj@RockyMountainNews.com or 303-954-5207
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June 5, 2008
11:19 a.m.
Suggest removal
jacka writes:
Suprised, not
June 5, 2008
2:37 p.m.
Suggest removal
Diff writes:
WE are doing better than the country as a whole and A LOT better than some locations. And what must be kept in mind - that for most, because most people have owned their homes for more than a couple of years the "loss" is just on paper.
Plus the number of homes being sold is not that far off, one sign to me that the price "correction" might be about over!
June 5, 2008
2:50 p.m.
Suggest removal
WarrenJimmyBuffett writes:
Diff, If you are ugly, but not as ugly as other people, you are still ugly. Kind of like Colorado real estate. There are much prettier things to invest your money in than the great money losing hole of real estate (whether here or other places).
June 6, 2008
1:41 p.m.
Suggest removal
ofcourse writes:
WarrenJimmyBuffet...you're an idiot. Your name either implies you're a savey investor or you've been doing boat drinks. You probably refied and took the proceeds and bought a boat. Now you're in trouble and wonder what happened. Many neighborhoods have positive growth, many don't. And Diff, we are about at the bottom. I track 25 neighborhoods and the inventory and percentages prove most are coming down. When a neighborhood gets to 1.2% of available homes, the prices start to increase. It's all about inventory!!
June 7, 2008
2:44 p.m.
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oceanview78382 writes:
ofcourse instead of insulting others who disagree with you why not give us some of this info you claim to have.
What are the inventory numbers from the 25 neighborhoods you track?
Tell me about neighborhoods close to downtown- which ones have high inventory and bargains?
If you know something about real estate -share it
June 7, 2008
7:56 p.m.
Suggest removal
WarrenJimmyBuffett writes:
ofcourse, Inventory increases when foreclosures increase due to ARM resets, credit tappping out, and falling real estate prices. We are just in the middle of the foreclosure crisis. However, I suggest you go use leverage to buy as many houses as you can today, so you can lose any money that you may or may not have. Then, when you are completely broke, you can go sleep on the train tracks.
June 8, 2008
5:23 p.m.
Suggest removal
pj writes:
I am not surprised by this article. I thought the closure rate would be HIGHER. People that had great equity are watching it shrink as each property in their area goes down the drain to foreclosure. Try selling YOUR home in this market. We tried for 4 years, and a few near sales, but the people couldn't qualify for a loan -- big surprise.
The bigger surprise is that MARKET VALUE has dropped dramatically due to the many people caught in the ECONOMIC DEPRESSION or RECESSION, whatever you want to call it. Yes, many people were given mortgage loans that should not have - they truly couldn't afford it. But they've pulled everyone else down with them.
It is UNFAIR to the many people that have worked hard to keep their finances in order to be punished by those that could not. Selling or even refinancing their homes has become a nightmare. New assessments are now figuring in all the darn foreclosures in the valuation of current values. Screw that!
The real crime here is the FEDS cutting interest rates that affected different credit lines than those governing mortgages. If they were truly interested in helping the foreclosure/mortgage problems, they'd cut the darned mortgage interest rates, so people could resolve these loan associated problems.