Economist's Commentary: September 11, 2008

Short Sale and Foreclosure Overview

By Wannasiri Chompoopet, Manager of Housing Statistics

In April of 2008 the NATIONAL ASSOCIATION OF REALTORS® conducted an on-line survey of members on issues related to the credit crunch, foreclosures, and short sales. We obtained approximately 5,800 responses. Here is an overview of what the responses indicated:

SHORT SALES: 

Realtors® indicated that overall 40 percent of their clients have been involved in a short sale. Of those Realtors® participating in short sales, 55 percent reported that they had assisted buyers, and 45 percent had assisted sellers. The top states in terms of the percentage of realtors involved in short sales were Nevada (65%), Rhode Island (52%), California (52%), Florida (50%), and Arizona (47%). The states with the lowest percentage of realtors involved in short sales were Vermont (less than 1 percent), Wyoming (11%), Mississippi (17%), Alaska (17%), and Delaware (18%).

Short sales involve some write-down by the lender of the amount owed. We asked Realtors® to indicate the extent of write downs:

• Short sales with less than 5 percent debt forgiveness: 4.4%
• Short Sale with between 5 to 10 percent debt forgiveness: 11.9%
• Short sales with between 11 to 20 percent of debt forgiveness: 18.6%
• Short sales with more than 20 percent debt forgiveness: 26.7%
• Don't Know: 38.4%

FORECLOSURES: 

Realtors® were asked "In your market (or MLS) what percent of all active listings are from foreclosures? Discounting the "Don't Know" responses, the median of all responses was approximately 6 percent. The break down is below:

• 0% because my MLS does not list foreclosed homes 2.8%
• Less than 1% 6.6%
• 1 to less than 5% 14.8%
• 5 to less than 10% 12.9%
• 10 to less than 20% 11.0%
• 20 to less than 30% 9.5%
• 30 to less than 50% 7.5%
• More than 50% 4.9%
• Don't know 30.0%

CREDIT: 

In examining credit availability Realtors® were asked "Currently in your market, what percent of your clients do not get approved for a mortgage loan?"

• No problems - all (or nearly all) are approved. 36.3%
• Less than 20%:          30.9%
• 20 to less than 35%:  15.0%
• 35 to less than 50%:   8.9%
• 50% or greater           8.9%

The state with the least mortgage approval problems was Alaska, where 67% of respondents said their clients have no problem getting approved. Similar trends were seen in New Jersey (59%), Montana (48%), Wisconsin (47%), and the District of Columbia (46%).

In a difficult market, it is sometimes challenging to determine the factors that are influencing a buyer's decision. The questionnaire asked if the recent client had postponed the home buying decision:

• No. Buyer purchased a property 50.1%
• Yes. Buyer wanted to wait for price to fall further 22.9%
• Yes. Buyer was unable to secure a loan 6.3%
• Yes. Buyer could not locate the home they liked 4.0%
• Yes. Buyer unable to purchase due to need to sell current home 7.8%
• Yes. Decision changed due to personal reason 3.9%
• Other, please specify 5.1%

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

Comments? Questions? E-mail NAR Research.

NAR members, learn how you can add this commentary to your Web site, blog, or newsletter. Read more >