Real Estate Owned Properties Effects- By: John Cutts
The large supply of real estate owned properties in Saint Louis has certainly caused two things: they dragged home prices down and, at the same time, affected construction starts of single-family houses.
According to the Federal Housing Finance Agency, home prices in the Saint Louis metro areas dropped 4.98 percent in 2010. The said figure is actually based on the complied data of purchase-only index. Aside from this index, the FHFA also has another much broader index which paints a better-looking image of the real estate market despite the presence of many bank owned homes in Saint Louis. This home pricing index tracks both refinancing and purchase transactions and revealed a 0.43 drop in the city’s home prices.
If you compare the statistics side by side, you will notice they have their own advantages and disadvantages. Although the broader home index involves more homes, including real estate owned properties, it can be subjected to bias since refinancing are usually dependent on appraised home values and not the actual selling price. For the other index, it only covers a small number of homes, although it escapes the said bias.
Aside from home prices, the growing number of homes in Missouri bank owned home listings has also made a negative impact on the home construction industry. For the month of February, only 120 permits were issued in eastern Missouri, 43 percent less than January figures.
Experts believe that the snowy weather is one of the factors why there were only few construction permits applied. But they also think a bigger factor is the sluggish economy and problems in the housing market, particularly the large volume of bank owned foreclosures for sale in the market.
Nationwide, the housing market is not showing any clear signs of a lasting recovery and there are still states experiencing declining home prices due to their large inventory of real estate owned properties.
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John Cutts has been educated in the finer points of the foreclosure market over 5 years.