I think not.
Crain’s ran an article yesterday stating that foreclosures were 34% of the first quarter home sales in Illinois. The article also goes on to suggest that foreclosures sold at a 46% discount on average. I take exception to both numbers.
First, all these numbers come from RealtyTrac and the foreclosure sales numbers I see on their site are a bit lower than the numbers reported in Crain’s. However, it’s entirely possible that RealtyTrac counts foreclosures differently in different releases. We just need to get to the bottom of it.
Second, when you say that foreclosures sell at a 46% discount the implication is that they are selling 46% below what they would sell for if they were not in foreclosure. And that number is a) totally unbelievable and b) impossible to measure (how could you possibly know what it would sell for if it wasn’t in foreclosure?). Based upon the way the Crain’s story is worded it sounds like RealtyTrac
is comparing the average sales price of foreclosed properties to the
average sales price of non-foreclosed properties – which makes no sense
because more of the foreclosures are concentrated among lower income
people living in homes that were less expensive to begin with. That
would be like declaring that hamburger is being discounted by 50%
because it’s half the price of steak (I don’t buy the meat in our house
so I really don’t know the percentage here but you get the idea).
Anyway, the article got me to thinking and I realized that I could track the foreclosure sales trend in Chicago…and Voila!
Although the percentage has come down recently it rather shockingly surpassed 44% back in January. We don’t have enough data to know if this percentage is seasonal yet but I wouldn’t be surprised if it is. I would think that as we enter the peak home selling season in Chicago more “normal” homes hit the market and drive down this percentage.