I just read on CNN.com that home sales in Southern California surged 22% in April – mostly from investors buying up foreclosures.  This may not appear to be great news for regular sellers (i.e., those homes not bank- or HUD-owned), but it really can be of the good.

Part of the difficulty I am experiencing as a listing agent at this time is my sellers are competing with foreclosures.  The foreclosed homes can be sold at a much lower price because big business can afford to take a loss where Mr. & Mrs. Everyday Homeowner cannot. Big business can just chalk their short sales up to business expense, but regular sellers have to find money to bring to the table at closing if the sales price doesn’t cover payoff requirements.  However as these foreclosed, inexpensive homes cycle off the market, the inventory supplies will again favor regular sellers because there won’t be as many "deals" to be had.

On the down side, these foreclosed homes are having a negative impact on the price of other homes because fair market value is based on the sales price of similar homes in the neighborhood.  Just a couple of years ago, it was easy to ignore bank-owned property when real estate agents analyzed the market to determine price.  Sales then were strong enough where these homes could be dismissed.  Today, however, the foreclosure sales seem to be matching (or running right on the heels) regular home sales, forcing agents to consider them along with other home sales.

I just did a quick search on my local MLS.  My criteria was $120,000 to $130,000 price range in one neighborhood.  Of the 24 homes that came up for sale, 9 were distressed, short-sale, or bank-owned.  If this sampling held true throughout the country, that 37% of homes are in preforeclosure or foreclosure clearly indicates the housing market has a long way to go before recovering.

But again, that 22% increase in Southern California could be the light at the end of the tunnel.  Sunny California will again shine!