Demand For Distressed Properties Outpaces Supply For First Time

The foreclosure/bank-owned and short-sale portion of the Loudoun County real estate market has been steadily improving over the last 6 months. But last month brought some of the best news we've had in a long time - demand outpaced supply!

For the first time since the market turned, there have been more distressed properties sell than new ones come on the market in a one month period. August had 326 distressed properties sell versus 306 new ones come on the market.

Here's a graph showing new listings (supply) versus solds (buyer demand) for 2008 (click to enlarge):

 

Notice that in January, the number of new listings was more than double the amount of solds. Since then, the number of solds has been steadily increasing. The number of solds in August was more than double those in January.

As for inventory, there was a spike in new distressed property listings last spring, but it's back down to the 300 per month level.

This is very good news for not only the foreclosure/bank-owned and short-sale property market, but the Loudoun County real estate market in general. The key ingredients to a stabilization of the market is lower inventory and higher demand, which is what we're seeing across the board in Loudoun County.

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Loudoun County Foreclosure/Bank-Owned and Short-Sale Statistics - July 2008

With all the hype and talk about foreclosure/bank-owned and short-sale properties, especially in Loudoun County, you’re probably wondering what that segment of the real estate market is up to. Let’s look at the statistics to find out…

Supply/Inventory

• The number of foreclosure/bank-owned and short-sale properties that came on the market in July 2008 was 318. This is an 8 percent increase from June 2008 (318 versus 291).
• The number of foreclosure/bank-owned and short-sale properties that came on the market in July 2008 was 45 percent more than in July 2007 (218 versus 175). This statistic in itself does not look very good, but let’s continue looking at buyer demand and then look at the overall picture.
• New foreclosure/bank-owned and short-sale listings comprised 47 percent of the total new listings in Loudoun County in July 2008

Demand

• The number of foreclosure/bank-owned and short-sale properties that went under contract (aka sold) in July 2008 was 299. This is a 12 percent increase from June 2008 (299 versus 263). This is a key statistic because July is usually slower than June when it comes to buyer activity and shows that buyer demand for these types of properties is up.
• The number of foreclosure/bank-owned and short-sale properties that sold in July 2008 was 440 percent higher than in July 2007 (299 versus 68). This shows a huge year over year improvement that has been the general trend in Loudoun County so far this year.
• Foreclosure/bank-owned and short-sale properties comprised 54 percent of the total number of homes sold in Loudoun County in July 2008

Although inventory is up, buyer demand for distressed properties has risen tremendously helping to absorb these new properties/listings and stabilize the market. For example:

• In July 2007, the ratio of new listings to buyer demand was 5:2 (for every 5 new listings, 2 went under contract/sold).
• In July 2008, the ratio was almost 1:1.

Although we haven’t seen the flow of foreclosure/bank-owned and short-sale properties slow down, buyers and investors are out in full force buying them up. The fact that buyers and investors are out is great news for not only the distressed property market in Loudoun, but the overall Loudoun County real estate market.

In a nutshell, despite increased inventory, the distressed property segment of the market is showing improvement. It’ll be even better once we see new inventory start to plateau and eventually go down while buyer demand stays strong. And if Loudoun County gets involved in buying up foreclosure/bank-owned properties like Fairfax County is going to do, that’ll be even better.

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Loudoun County Foreclosure/Bank-Owned and Short-Sale Inventory and Buyer Demand Balance Each Other Out

Loudoun County has seen a huge increase in the number of foreclosure/bank-owned and short-sale properties that have hit the market so far this year compared to last year during the same period. But the increase in buyer demand so far this year has been at about the same percentage rate, if not higher as the increase in inventory.

Here are the numbers:

• The number of new foreclosure/bank-owned and short-sale properties that came on the market in 2008 YTD is up 64 percent from the same time period in 2007
• The number of foreclosure/bank-owned and short-sale properties that have sold* so far this year is up 70 percent from the same time period in 2007

*by contract date

The demand for these types of properties is keeping up with the rate of new ones coming on the market. This is good news because we need the inventory to be absorbed so the market can stabilize and start recovering.

Percentage of Foreclosures and Short-Sales Holds Steady

The percentage of total properties for sale in Loudoun County that are foreclosures/bank-owned or short-sales is holding steady around 25 percent. We’ve been seeing the percentage stay around 25 for most of this year.

Though we’d all like to see that percentage go down, it’s definitely good news that it’s not increasing. The fact that it’s not increasing is another sign that the worse is behind us.

-Danilo

Rate Of New Bank-Owned and Short-Sale Listings Steady

The rate at which new foreclosure/bank-owned and short-sale listings are entering the market in Loudoun County remains steady. Here are the numbers:

• January 2008 saw 310 new foreclosure/bank-owned and short-sale listings come on the market. That’s 10 new ones per day.
• February 2008 had 289 come on the market. That’s 10 per day.
• March 2008 had 301 come on the market. That’s 9.8 per day.
• So far this month (thru 4/22), there have been 253 new foreclosure/bank-owned and short-sale listings come on the market. That’s a slight increase to 11.5 per day, but not too far off the 10 per day average.

The trend so far this year seems to be about 10 or so new foreclosure/bank-owned and short-sale listings on the market each day. I’ll keep you posted on how April ends up and whether this trends continues or changes.

-Danilo