Homes for Sale in St. Charles: Five Real Estate Market Surprises in 2012

Surprise #1:  Sales of Foreclosed Homes Decreased-Banks Get it Right!

Analysts and brokers (and, admittedly, me) expected the sale of foreclosures to increase as a wave of homes completed the foreclosure process.  Fortunately, that flood of homes onto the market, depressing prices, didn’t occur.  During the first six months of 2011, 54 homes that had been foreclosed upon were sold.  In 2012, that number was cut in half to 27. 

Banks seem to be smartly trying to manage the pace of these sales to mitigate a depressing effect on home prices.  That’s rational given that the 27 foreclosed homes in St. Charles that sold went for approximately $85/sq.ft., which represents a 34% discount from traditional sale prices during the same period of time.

Surprise #2:  Banks Get It Right Again!

Foreclosures are an expensive process for a bank.  Yet banks have been historically slow to accept short sales in lieu of foreclosing (where the owner can no longer afford the home but doesn’t have equity to pay off the loan if the home was sold).  That may be changing as the number of local short sales that closed (30) was actually higher than the number of local foreclosures that sold (27) for the first time ever in the six month period ending in June. 

While the banker may not want to “let the borrower off the hook” it ultimately is rational as short sales sold in St. Charles for a 14% discount to traditional sales versus a 34% discount for foreclosures.  This decision by the lenders to work with borrowers allows the borrower to move on and rebuild financially and minimizes losses for the lender.

Surprise #3:  Sellers are Rapidly Disappearing

That fewer sellers want to sell at lower prices isn’t a surprise.  What is surprising is that RATE at which sellers are pulling back.  In June 2008 there were 827 homes for sale in Saint Charles.  That decreased over the next four years by 9%, 2%, 7% and 15% so that we now have a market of homes for sale in St. Charles that’s 30% smaller than it was four years ago.

These decisions not to sell represent delayed or foregone job opportunities, business formations, retirements, etc.  It’s no wonder the economy is having difficulty reviving with the number of people who may wish to move but who are trapped in homes that they can’t sell or won’t sell at current market prices.

Surprise #4:  Market activity accelerated despite fewer homes for sale

There have been more homes under contract during April, May and June than at any time since 2007.  While not all of these homes will eventually close, this is a sign that buyer activity remains brisk because of the low rates and prices currently available even with fewer homes from which to choose. 

Surprise #5:  Prices Continue to Fall

At the beginning of the year, I forecast a price decrease through mid-year and then a rise in prices throughout the remainder of the year because of the entry of foreclosed inventory into the market.  What’s surprising is that prices have continued to decline despite fewer foreclosures in “for sale” inventory and that the short sale and foreclosure prices have actually stabilized.  It has been traditional sales that have driven the downward pressure.  My thought is that sellers may be too scared of a market they're forced to sell in and might not be realizing their strengthening bargaining position.

Those are the five things that surprised me.  You may have had your own insights I’d be happy to hear.

If you have questions about the data feel free to contact me through www.scottnowling.com.