How Do Bank Sales Figure in Home-Sales Data?
Last week, I wrote a post about home sales in SoCal in July being up year over year for the first time in three years. Shortly after, a blog reader calling himself Workafrolic weighed in with this thoughtful comment.
OK, this one got me so upset that I actually emailed the radio station on which I first heard the story. Sales are up and prices are down so they concluded that more people are buying houses. Simple, right? But, here is the key question: what happens to the numbers when you regularize for foreclosures? As I understand it, when the bank forecloses, the transaction counts as a sale because it’s a change in ownership. But that doesn’t mean that more people (like you or I) are actually buying houses. That could be the case, but until you subtract out the foreclosures, we won’t know. Since the outstanding loan amount on foreclosures is usually less than what the house would have sold for last year, it can look like a drop in price. BUT … that doesn’t mean that listing prices have come down significantly. Anecdotally, a lot of would-be home buyers are seeing a continuing lack of realism in listing prices, and I’ll bet every seller who heard the news story had the desire to put their price back up on that basis.
Can DataQuick back out the foreclosures? I’m told the figure is usually a ragged number (the outstanding loan balance, not a usual negotiated amount) so if someone could run some logic on this, it would be VERY helpful to know.
Workafrolic is correct when he says that homes purchased by lenders show up in the recorder’s office just like homes purchased by individuals. Workafrolic is also right when he says that consumers can often recognize these lender purchases by their oddball prices.
Sales to lenders show up in Redfin listings (under Sales History) just like sales to regular people. They’re almost always a random number, like $591,802, say, versus $590,000. (To verify, you can often punch in the address at propertyshark.com and find out who the buyer was.) I’ve also posted about the fact that there are thousands of “hidden foreclosures” – properties that have been taken back by lenders but that have not reappeared on the MLS for resale. You can search any Redfin neighborhood for recent sales and see that many oddball-priced lender purchases are included among them.
So, what percentage of the DataQuick monthly sales numbers are purchases by lenders and not by individuals? Or does DQ back out the lender purchases? DataQuick’s news release includes two contact names for media calls, Andrew LePage and John Karevoll. I called both of them last week but never got a callback. I guess a blog doesn’t count as “media.”
Like Workafrolic, I have to wonder whether lender purchases are part of the home-sales figures. If they are, they’re skewing the numbers. If anyone knows for sure (DataQuick, perhaps?) please post your insights here. Workafrolic and I would appreciate it.
Recent Redfin posts:
Angelino Heights: Beauty in the Beastly Neighborhood
The Treetop View for L.A. Homebuyers: Tall Palms Are a Headache
Banking on the Home Dividend
