[janette moss]

How much affect do foreclosures have on home values in the neighborhood and those that are on the market? I saw a sign (bank-owned) JUST go up on my block this morning (my home is for sell)! Once a foreclosure is sold, do/can property values come back or am I dreaming?

[magellan]

Originally Posted by janette moss

How much affect do foreclosures have on home values in the neighborhood and those that are on the market? I saw a sign (bank-owned) JUST go up on my block this morning (my home is for sell)! Once a foreclosure is sold, do/can property values come back or am I dreaming?

It depends on what the home is sold for by the bank, but generally speaking a foreclosed home is sold for far less than market value. That sale price is then public record for anyone to see, and could affect "comps" in that area. If you get an area or neighborhood that is highly concentrated with foreclosure activity, that area will suffer greatly.

We had one home in our newer neighborhood of about 175 homes that was foreclosed, and it sat for over a year before the bank could even market the property. The neighbors tried to keep up on the exterior lawn and maintenance, but the drought we had killed the grass down to dirt. It now has a new owner in it and I am very pleased (to say the least) to have that home occupied. The sale price might affect other homes values, but having it occupied is helping a great deal. And since it's only 1 of 175, I don't think it will have that great of an affect.

[michiganbob]

Originally Posted by janette moss

How much affect do foreclosures have on home values in the neighborhood and those that are on the market? I saw a sign (bank-owned) JUST go up on my block this morning (my home is for sell)! Once a foreclosure is sold, do/can property values come back or am I dreaming?

Unfortunately, the biggest problem that a foreclosure sale does is set a new "bottom" price for the neighborhood. Yes, it might have been in rougher shape than your place, but once homebuyers learn how little it went for, that becomes the new target. Then, all it takes is one otherAlso, if there are several foreclosures in the same area, they can drive down the appraisel prices of other homes that come on the market or when people try to refinance. If their homes are now worth less than what they paid for it (yes, it's happening) they might not be able to get a new loan and that might force them into foreclosure, which starts the downward cycle again.

In my personal research on homes here in Lansing, I am seeing asking prices dropping 20 to 30% since Spring . . . and still no sales. Some of the national housing blogs I read talk about prices in SOME markets (like Vegas and Phoenix) dropping by 50% or more from the peak. There is just way more supply than demand out there and if neither of those factors change, prices will not come back up. Michigan continues to lose jobs and people are moving out of state. Builders are still putting inventory into the market, so I think things will get worse before they get better. As I said in another thread: think years rather than months.

Just my humble opinion.

[janette moss]

Originally Posted by michiganbob

Unfortunately, the biggest problem that a foreclosure sale does is set a new "bottom" price for the neighborhood. Yes, it might have been in rougher shape than your place, but once homebuyers learn how little it went for, that becomes the new target. Then, all it takes is one otherAlso, if there are several foreclosures in the same area, they can drive down the appraisel prices of other homes that come on the market or when people try to refinance. If their homes are now worth less than what they paid for it (yes, it's happening) they might not be able to get a new loan and that might force them into foreclosure, which starts the downward cycle again.

In my personal research on homes here in Lansing, I am seeing asking prices dropping 20 to 30% since Spring . . . and still no sales. Some of the national housing blogs I read talk about prices in SOME markets (like Vegas and Phoenix) dropping by 50% or more from the peak. There is just way more supply than demand out there and if neither of those factors change, prices will not come back up. Michigan continues to lose jobs and people are moving out of state. Builders are still putting inventory into the market, so I think things will get worse before they get better. As I said in another thread: think years rather than months.

Just my humble opinion.

You can't be any more humbly honest than that. Yes, the home is in worse shape than mine (frozen pipes that busted and water throughout the walls that have never been repaired). Thank you for the "real deal" -- a painful reality on foreclosres and I'm sure there will be more.

[Cliffie]

Originally Posted by janette moss

How much affect do foreclosures have on home values in the neighborhood and those that are on the market? I saw a sign (bank-owned) JUST go up on my block this morning (my home is for sell)! Once a foreclosure is sold, do/can property values come back or am I dreaming?

It depends on all kinds of things. A foreclosure doesn't need to affect the value of the house at all; that really depends on the condition of the house and the demand by buyers.

[suydam]

Originally Posted by Cliffie

It depends on all kinds of things. A foreclosure doesn't need to affect the value of the house at all; that really depends on the condition of the house and the demand by buyers.

True...but foreclosure affects the supply without improving the demand. That drives down prices quickly. What's more the bank will sell at a far lower-than-comparable price. That affects buyer attitude.

[janette moss]

Originally Posted by Cliffie

It depends on all kinds of things. A foreclosure doesn't need to affect the value of the house at all; that really depends on the condition of the house and the demand by buyers.

The house has been in the process of foreclosure for at least a year. This winter, the pipes busted and water was running through the walls and down the drive-way. The ex-owner notified the neighbors of this. Has not been repaired, but the fore sale sign just went up yesterday morning. Maybe it's listed "as is". That sounds like a serious plumbing job that could cost the buyer money. I called my realtor, and he said he will get the information as to details of the sale.
This home has not even been listed on the "comp sheet" yet. This could be scarey if it drives down home values in the shape that it is in!

[Cliffie]

Oh, well, then it's not the foreclosure, it's the neglect. As long as YOUR home is in good shape you still have a shot. If you're in Michigan, it's a long shot, but...

[janette moss]

Originally Posted by Cliffie

Oh, well, then it's not the foreclosure, it's the neglect. As long as YOUR home is in good shape you still have a shot. If you're in Michigan, it's a long shot, but...

Thanks Cliffie!

[jumpygh]

I'm trying to sell my house, and this is a big problem! All the fools who took on loans they couldn't afford are now having to give away their houses. It's impossible for responsible home sellers to compete with that. My neighbor, whose house is 400 sq ft larger and has an extra bedroom, is apparently close to foreclosure and slashed his price $50K, so it's the same price as mine! I obviously had to lower my price even more. I'm disgusted at these people.