Although foreclosures bear a large share of the blame for our recent real estate woes, things are improving. Foreclosures in the Washington region are down 32 percent compared to 2009, which could help the market in 2011.
Foreclosures are problematic because they add to the unsold inventory, and excess inventory is one cause of declining home prices.
The poor condition of some foreclosures also pulls prices down. Buyers expect to get a significant discount when buying a foreclosed property - even those in good shape.
Banks and Realtors understand this, too. As a result, foreclosed homes typically sell for 26 percent less than nearby homes that aren’t in foreclosure, according to RealtyTrac data.
The low mortgage interest rates we enjoyed throughout 2010 may have contributed to the decline in foreclosures.
At the beginning of the year, many were concerned about rates because of the large number of adjustable-rate mortgages that would reset in 2010.
If rates had been higher, many homeowners in those mortgages would have seen their payments rise, and some of them could have wound up in foreclosure. But rates fell in 2010 instead, which meant that some of those mortgages actually became more affordable.
You’ll see in today’s charts that the number of foreclosures varies widely around the Washington region. Arlington and the District have less than 1 percent of their housing stock in foreclosure. Prince William and Prince George’s counties are above 4 percent.
Still, that’s an improvement from last year, when those counties had more than 6 percent of their total housing stock in foreclosure.
The flood of foreclosures in Prince William caused prices there to fall dramatically in 2007 and 2008. That stimulated a lot of interest among buyers, so sales exploded, and prices eventually started climbing back up. We are seeing a similar increase in buyer activity in Prince George’s County, so prices may rise there before long.
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The statistics in this story reflect a metropolitan area that includes the Maryland counties of Montgomery, Prince George’s, Anne Arundel, Howard, Charles and Frederick; the Virginia counties of Arlington, Fairfax, Loudoun, Prince William, Spotsylvania and Stafford; the city of Alexandria; and the District.
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