Amid the continued housing collapse, there is some good news: prices have dropped enough in some areas that the market is beginning to clear. An increase in transaction velocity is critical to working off ballooning inventories, so, perversely, this should be positive for the market overall.
The National Associaton of Realtors (NAR) reported last week that sales of previously-occupied homes are down 18% year-over-year. But in particularly distressed areas, like Detroit, where average prices are down 56%, transaction velocity is accelerating. WSJ:
Though Americans remain wary of further drops in housing prices, the data from these areas show that some buyers are trolling for bargains. Sellers “have moved into the acceptance mode” and are pricing homes more realistically, says Thomas Lawler, a housing economist in Leesburg, Va. “I think it is the first stage of good news for the market.”
…For the first four months of this year, home sales in Detroit, excluding suburbs, totaled 3,360, up 48% from a year earlier, according to the Michigan Association of Realtors. The average price dropped 56% to just $20,514. That average is so low because many of the sales involve decrepit homes in neighborhoods with few jobs.
Most of the recent sales in Detroit involve investors buying foreclosed homes, says Carl Williams, president of the local association of Realtors. The homes are selling, he says, because “the prices are dirt cheap.”
Sales of “normal” homes, those that haven’t been foreclosed, remain very slow, Mr. Williams says. Still, he sees it as a good sign that lenders are finding buyers for the foreclosed homes. To the extent that investors can renovate and find tenants for vacant houses, neighborhoods can start to heal.