Coming on the heels of a dismal January, the National Association of Realtors (NAR) March 22 data release announced good news declaring a home sales “surge” during February (nar.realtor). February’s closings increased 11.8 percent, compared to January!
But the bad news is that the number of sales also decreased 1.8 percent from last year. If you follow real estate news, you know that homes sales stats were disappointing during the winter. (Consider that 2018’s total existing home sales were lower than the previous year’s total, according to NAR’s statistics). February’s adjusted annual home sale rate of 5.51 million is lower than the same time last year, and pales in comparison to the 6.48 million home sales in 2006.
Although February was indeed a busy month, NAR’s March 28th data release of the Pending Home Sale Index predicts a slow start to the spring market. Homes that went under contract during February decreased one percent from the previous month and decreased 4.9 percent from the previous year. This “forward looking index” indicates that next month’s home sales may disappoint.
But there is a silver lining. Home sale prices continue to rise, meaning that home owner equity is not eroding. February’s median existing home sale price increased 3.6 percent from the same time last year. And, according to NAR’s statistics, home sale prices have risen for 84 consecutive months (which equates to seven years of continued gains)!
Although home sale prices are rising, there are still many home owners who are underwater. According to Attom Data (attomdata.com), distressed home sales still account for 12.4 percent of all home sales. Of course, this is far from the 38.6 percent in 2011. And the percentage of distressed sale continues to decrease. However, the number is still significant.
It’s estimated there are millions of underwater home owners. There are a number of reasons why home owners may be underwater, including (but not limited to) years of deferred maintenance, or a negative equity mortgage. Many short sales today include investment properties. Some home owners don’t know they are underwater until they list the home for sale.
Although not as prevalent as in 2011, the short sale is still relevant! Many underwater home owners don’t have to sell, as they are not financially distressed. However, some are compelled to sell for a number of reasons (such as divorce, bankruptcy, etc.). Some underwater home owners may have a desire to move, but can’t because they are underwater (such as empty nesters and retirees).
If you think your home sale may result in a short sale, get the facts. Question what you hear from others and what you find on the internet. There is a lot of information circulating about short sales. A majority of the information is either misleading, erroneous and/or outdated. Consult with an attorney who negotiates sales to understand the legal aspects the short sale. Also consult your accountant for the financial implications of a short sale.
There is much to consider, and a lot at stake when selling your home as a short sale. Be careful when considering your listing agent. Hire an experienced short sale agent that knows the process and is savvy about appealing lender values. Many listing agents will give up on a short sale, mostly because it’s hard work. So most important, make sure your agent has a track record of getting the short sale to settlement.
Dan Krell is a Realtor® with RE/MAX Success in Potomac, MD. You can access more information at DanKrell.com