In a comment on another post on Valley home sales, Frank gave me a heads up on this article on ASU’s home sale data including foreclosures!
Butler said he agrees that trustee sales should not be lumped in with routine resales and would be reported separately from now on.
The market has changed so rapidly, he said, that the methodology he once relied on for accurate sales data suddenly has become obsolete.
That’s embarrassing for an economist! That cuts into your economisthood.
I have never included foreclosures (trustee deeds) in my data at Arizona Home Sale News or in the 124 zip code Real Estate Notebooks that you see in the right hand column.
Foreclosures aren’t open market transactions so I exclude them from my data. However, when a bank sells a previously foreclosed home, I include those transactions.
I never would have dreamed that Butler included bank foreclosures in his data. It was obviously an oversight.
5 responses so far ↓
1 Zip Code Real Estate Notebooks - UPDATED with April 2008 Data | Arizona Real Estate Notebook // May 21, 2008 at 6:15 pm
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2 Brian McMorris // May 22, 2008 at 1:59 pm
I don’t understand this argument made on this site all the time. If a bank foreclosure is sold at auction or in some type of private negotiation, it really is no different than an open market transaction (which is also a private negotiation between buyer and seller). The bank gets the highest price it can negotiate through whatever means it has, including listing through MLS.
The sale price of that foreclosed home is recorded by the county and is a matter of public record. So that selling price helps establish the market for future home sales of comparable specifications.
I think the RE industry is trying to understate the magnitude of the narket price decline by playing these games of selecting the sales that make the best price case for future sellers. The problem is that the market knows ALL and those public records will work their way into the pricing mechanism, regardless of the best efforts of the profession.
3 John Wake - Real Estate // May 22, 2008 at 2:24 pm
Brian,
The idea is this; when a bank forecloses on a home and the bank takes ownership, that is not really a sale, it was not an open market transaction at all, the bank just took over ownership.
After the bank forecloses on the home, the bank becomes the owner. When the bank sells the home via the MLS or an auction or whatever, that sale is an open market transaction.
If you buy a home in foreclosure on the steps of the county courthouse before the bank takes ownership, you might consider them a free market sale, although I don’t because of all the stringent requirements, such as paying in cash at the auction or right afterwards.
4 Brian McMorris // May 27, 2008 at 4:47 pm
Okay, I understand the title transfer from owner to bank is not considered a “sale”. But certainly when the foreclosed property is sold by the bank back into the market, it should be considered a “sale” for the purpose of competitive comps and average sales price in reports.
5 John Wake - Real Estate // May 27, 2008 at 5:26 pm
Agreed!
That’s the way I’ve always done it.
ASU will start doing it that way.
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