5 Surprises in the Geneva Real Estate Market in 2012

Surprise #1:  Sales of Foreclosed Homes Didn't Explode—Banks Get it Right!

Analysts and brokers (and, admittedly, me) expected the sale of foreclosures to increase dramatically 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, 20 homes in Geneva that had been foreclosed upon were sold. In 2012, that number rose, but only slightly, to 25. 

Banks seem to be smartly trying to manage the pace of these sales to mitigate a depressing effect on home prices.  That makes sense because foreclosed homes for sale in Geneva sold for approximately $93.75/sq.ft., which represents a 29% 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 (15) was actually higher than the number of local foreclosures that sold (13) 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 does make sense as homes for sale in Geneva that were short sales sold for a 14 percent discount to traditional sales versus a 29 percent 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 450 homes for sale in Geneva. That June count decreased over the next four years by 20 percent, 6 percent, 1 percent and 17 percent so that we now have a market of homes for sale in Geneva that’s 38 percent 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

February, March, May and June represented four of the nine busiest months since 2007 if measured by homes under contract but not yet closed. While not all of these homes eventually closed, 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. 

Closed sales, which follow from contracts, were at the busiest clip since early 2008 on an annualized basis.

Surprise #5: Prices Stabilize in Geneva

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 remained flat in Geneva and not decreased. This may be in part due to smaller than expected numbers of foreclosures in “for sale” inventory, short sale and foreclosure prices actually increasing and pent up buyer demand.   

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.

This representation is based in whole or in part on data supplied by Midwest Real Estate Data LLC for the period January 2008 through June 2012. Midwest Real Estate Data LLC does not guarantee nor is it in any was responsible for its accuracy. Data maintained by Midwest Real Estate Data LLC may not reflect all real estate activity in the market.