What a difference a couple of years makes! In February of 2011, I ran a search in RMLS that resulted in 4208 active listings in Portland. 441 of those were bank owned (REO) and 750 were short sales. REOs made up 10.4 of the market and 17.8% were short sales.
I ran the same search yesterday: 1544 active listings of which 45 were REO (2.9%) and 87 short sales (5.6%).
Why the drop? The simple answer is that the economy is better. There have been fewer foreclosure actions/defaults and as the real estate market improves, the number of underwater owners decreases. Additionally, a strong argument can be made that those that have held on this long can/will probably ride through the rest of the storm. The system has worked through the majority, but not all of the at risk properties.
On the bank owned front, there are additional reason. A quick scan of the listed REO tells me that the majority are owned by the quasi-government agencies, Fannie Mae and Fredi Mac. These agencies are not subject some of the restrictions and laws (for mediation) placed on the commercial banks and were not subject to the impact of the MERS related ruling in the Oregon Supreme Court. My belief is that the banks are not sitting on property they can bring to market and sell but that they are holding property that they don’t have the ability to clear title and therefore cannot bring to market. I know of two instances where the mortgagee filed for bankruptcy and the properties have been stuck in limbo and vacant for more than a year.
I expect that we will see another wave of bank owned property in the Portland area but it will be nothing like what we saw in the past and I don’t think those properties will be massively discounted. Why? Look at the number of active listings. There’s just 36% of the number of listings on the market now as there were two years ago. I did discover that Zillow appears to universally discount bank owned properties 13% from their Zestimates.
I’ll do more of a year in review when the next RMLS market Action comes out mid-month.