A few days ago, in an office discussion about the real estate market, one of our senior agents expressed the opinion that the market has evolved into a 2-tier market. There are the foreclosed houses on one tier and all of the regular houses on a second level that he somewhat facetiously called the overpriced tier. I thought about that and have concluded, somewhat sadly that he is probably right, at least partially.
There is no getting around the impact that the foreclosure crisis has had on the market. Buyers have become enamored of finding the perfect house at a ridiculous foreclosure price – so they have turned into rabid deal shoppers. They are hooked on seeing that next house, in search of that one that they’ve heard of that was move-in ready and priced at ½ of its real value. Do they exist? Maybe, but the odds are likely 1 in 1,000, which is why these shoppers never seem to find it and keep shopping.
There are some good foreclosure deals out there, but almost all foreclosure homes require some work, some much more than others. Homes that go through the foreclosure process are often neglected, at best, and even vandalized or stripped at worst. The move right in and do a little touch-up painting foreclosed homes are very rare indeed.
And what of that other tier - the regular home that is put up for sale by a seller who is not in foreclosure? Are those homes really overpriced? Sadly, the answer all to often is yes. The root cause is the speed with which the market values dropped in response to the foreclosure crisis and other economic factors. It is extremely hard for homeowners to swallow the 20-25% value drops that most areas have suffered. Just in the last year, most areas in southwest Michigan have dropped between 10-18%.
You can go see what at least one national home valuation site estimates have been the downward drops by going to my web site – http://www.themilfordteam.com/ – and clicking on the Market Statistics choice. About 2/3 the way down that page is a link to an interactive Zillow.com map. When you roll over the icons for the various villages, towns, cities and townships in this area a pop-up tells you how much value was lost, on average, year-over-year, through the 2nd quarter of this year.
So, we likely do have a two tiered market right now; however, my own recent observations support my belief that sellers have finally heard enough, read enough and seen enough to finally start understanding what has happened to the value of their properties and have begun to move their price expectations in the right direction. Maybe not as fast as we Realtors would like, but it’s a start. Some have become discouraged and taken their homes off the market; and, that’s OK too, since it helps bring down the current inventory glut a bit.
I also see buyers starting to get tired of having to endure the mess and smells associated with going through some of the truly nasty foreclosed houses that are out there and starting to look more favorably at well-priced regular listings. Buyers are also getting a bit more educated about the frustrations that come with trying to buy a short-sale house or a foreclosed house and many are unwilling to put up with the wait and the frustrations of dealing with overwhelmed banks. Maybe on the buyer side we also have a 2-tiered market – shoppers and buyers. I certainly hope that more of the shoppers give up on finding the perfect foreclosed home and return to just being buyers, ready to buy the best home that they can find that meets their needs. I can help with that!