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Distressed Properties Are Skewing the Numbers

Jul 25, 2008
Foreclosures and Short Sales are affecting our Rochester MN Real Estate Market in the same fashion as many other communities. We discuss contributing factors and some insight gained by analyzing real estate sales statistics in this situation. The consequences or outcome of these variables affecting the market are also assessed in a direct manner, which relates to the poor quality of foreclosed or vacant homes.

It is clear that the volume of homes for a buyer to choose from has increased, and average market times are getting longer. Also, lenders are tightening their standards for prospective purchasers, and the average sales price, which is often seen as an indicator for appreciation/depreciation, is down slightly. So are things as gloomy as the media portrays them these days, or can we look past the numbers and find a ray of hope for the future?

According to the Southeastern MN Association of Realtors, the average sales price for a home in Rochester through the first 5 months of 2008 is $185,700, which is down a little more than 1% from 2007. In 2007 the average price was $187,500. This sure isn't an alarming number when compared to depreciation rates of 15-20% in other markets, but a sign of a loss in property value none the less.

Timothy Williams, of The Williams Home Team from Coldwell Banker Burnet in Rochester MN says, "The average sales price of foreclosed homes, which makes up about 1/5th of all of our recent sales, is well below the average sales price of a more conventional sale. These homes are driving the statistics downward giving us an unrealistic picture of what the market is doing." The Williams Team represents "typical" buyers and sellers as well as banks with their foreclosures and the investors who are most often purchasing them. Other Realtors and real estate agencies setup in a similar fashion may experience the same type of unrealistic statistical reports.

The following should also be taken into consideration when analyzing the data. "We are finding that the banks tend to list their homes near fair market value, but due to their condition many of these homes are sitting on the market for a long time and having several price reductions before they are getting any attention. This adds to the overall inventory and is lengthening our market times," says Rebecca Peterson, also of The Williams Home Team. Once again there is an awareness of a variety of factors that affect the real estate market as a whole, and skew traditional methods for assessing a fair market value. However, this perspective is generally not readily available to surmise without a working knowledge of the many factors that affect current real estate trends.

Rochester is definitely a unique Real Estate market that is certainly not feeling the doom and gloom that other markets are, nor are they being reported as so. The statistics are showing slight depreciation and a bit of saturation with the market, but one could only imagine how good these numbers would look if we filtered out the distressed properties!

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About the Author
Realtors Tim and Sandy Williams specialize in Rochester Minnesota real estate, provide homes in Rochester Minnesota, and MLS listings of Southeast Minnesota properties.
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