I inspected a condominium last week in the Hillcrest Park neighborhood in Vallejo, CA. I wanted to share a graph of sales within the subdivision over the past five years. What do you see?
While in the Hillcrest Park neighborhood, I shot the following video as I was considering the vast decline in property value and the impact foreclosure can have on a neighborhood – even beyond real estate values.
Condominium properties have been hit hard in many niches within the Greater Sacramento Region because the price of single family detached homes has become so much more affordable, and an HOA fee plus a mortgage payment often does not make good economic sense for buyers. Why pay more for a condo when you can get a detached home without an HOA fee, right? That’s often the rationale.
By the way, if you are in the market to purchase a condominium, I would strongly suggest you research the health of the HOA before making a purchase. It would be tragic to purchase a condo only to find out the association is bankrupt.
Ryan, we have definately seen that in our area as well, however not to the same degree. It is unfortunate because homeowners within these neighborhoods that are still there are powerless to stop the eventual declines in value. I still get questioned as to why I have to use foreclosure sales in my appraisals but as I tell them, when foreclosures are driving the market they have to be considered.
I know Tom. It’s devastating to see such a massive decline in property value in this neighborhood. This is an ugly looking trend. Having so many foreclosures really harms the community in so many ways – lower property value, constant turnover, a lack of stability, lower rates of home owner occupancy, and the ethos of the community overall too has to be impacted. I think about property taxes too. Has the Assessor lowered people’s taxes from $300,000 to $50,000? That’s not likely.
Sure they have to be considered, but any market aversion toward REOs vs a fair arm’s length sale (as defined by FNMA’s definition of Market Value), must be adjusted. They are not the same. If you have 2 identical homes with one being a REO, and the market will pay more for a traditional arm’s length sale over a vacant REO, (which they typically will), then the REO needs to be adjusted up. REOs are a distressed sale and do not fit the definition of Market Value. They have undue stimulus to sell and Lender’s having to clear their massive inventory of vacant homes they never wanted in the first place, are not typically motivated sellers.
Thanks for your comment Mark. I think you’re absolutely right here. This condominium neighborhood is being driven by the foreclosure market. If there are any arms-length potential sales in this subdivision, they might have a premium for being arms-length transactions, but they will be surely impacted by the high level of foreclosures in this neighborhood and therefore probably have to compete releatively close to the REO level (probably not at $120,000, for example).