Is 2012 the Year of the Foreclosure? Let’s ask Realty Trac!

The Realty Trac ( website does a really great job of tracking foreclosure properties across the US.  Below is a heat map from their site that shows you exactly where the foreclosures were locally and throughout the US as of December 2011. Give it a try.  Hover over a state for the quick stats or click for more in-depth data by county, zip code and even by town, in some areas…but keep reading!

The underlying story behind the numbers is troubling.  However, there have been several articles and reports recently that point to 2012 as being the “Year of the Foreclosure”.   They point toward the Shadow Inventory (about which we’ve posted before: Shadow Inventory) of foreclosed homes that are out there.  Banks have begun have taking more proactive measures in dealing with those whose mortgages are significantly delinquent.  They are acting more quickly and more assertively.  This could lead to a wave of foreclosures in 2012.  With processing delays streamlined and political red-tape reduced, foreclosures will be happening faster and more frequently, in 2012. 

What will this do to the real estate market?  Well, an influx of foreclosure properties will likely drive prices downward, especially in those areas where foreclosures comprise a larger part of the market.  This will be as a result of supply and demand, as well as The Principle of Substitution.

We all understand the effects of supply and demand on a real estate market.  But The Principle of Substitution will also have a hand in whether or not foreclosures will affect values in the future. 

The Principle of Substitution (POS) basically assumes that a prudent individual will pay no more for a property than it would cost to purchase a comparable substitute property.   The POS recognizes that a typical buyer will compare asking prices and seek to purchase the property that meets his or her wants and needs for the lowest cost.   

In other words, “Why would I pay more for a house listed as a conventional sale if I can get a similar house for less, even if it is a foreclosure?”  That is why in certain markets if a foreclosure is similar in terms of condition, size, location, etc to those homes that are listed for conventional sale, the foreclosure may drive down the value of the conventional sales.  In those markets, if the conventional sales want to compete, they may have to “stoop” to the level of the foreclosure.

As 2012 moves forward, it will be interesting to see how elements like foreclosure, interest rates, the economy and even the Presidential election will affect the real estate market.  Regardless of what happens, it will be a pivotal year.

What do you think?  Please comment and start a conversation…

If you have any questions about your real estate market or foreclosures, please feel free to call or email The Coyle Group at 215.836.5500 or


Double Dip

It’s official, a report released by Clear Capital concluded that we are in a “Double Dip” real estate market.  This should come as no surprise to anyone who has been following this blog or tracking the foreclosure market.  Below is a video released by that explains what it is, how it got here and where we are going from this point.

One interesting statistic that they cite in the report is the fact that Philadelphia has fared relatively well in this down trend in the real estate market, only declining 2.2% below the market bottom of 2009. I guess that’s a small glimmer of hope that we can hold onto…for now that is.


Tax Credit Expires

It happened over the weekend without much fanfare or comment.  The $8,000 homebuyer tax credit expired.  For some, it helped them make the move to homeownership.  For others, it was a much needed shot in the arm that boosted business and made everything feel like 2004-2005, again.  Many real estate agents, mortgage brokers and appraisers found themselves busy, some were even overwhelmed by the surge of business.  It felt so good that many pundits were touting the end of the housing crisis, claiming that the economic recovery is underway…look out, good times ahead!

While the economic recovery may be underway, it was not the tax credit that spurred it along.  The tax credit may prove in the weeks and months to come to have been a crutch upon which the housing market was propped. 

It will be interesting to see if the recovery has any legs now that the crutch has been removed. 

Based on what we’ve noticed in the Philadelphia markets, I think that we may see a dip in home prices in the near future.  The expiration of the tax credit may keep some first time buyers from entering the market.  This, along with new listings being added, will force pricing pressures downward as more listings chase fewer buyers.  It will be more important than ever for Philadelphia area Agents and Sellers to price their properites correctly and competitively.

The hand-out is over, interest rates are still artificially low and the tsunami of foreclosures is still on the horizon…it will be an interesting next few months.