Seattle home sales drop 32% – worst October since record-keeping started in 1994 – “shadow inventory” of 2 million homes

Nationally, 26% drop in sales of existing homes for October 2010. This was reported to have been the worst October in at least twenty years, according to the NY Times’ David Streitfeld (NY Times, Wednesday, November 24, 2010)

Portland, OR home sales droped 39%, Minneapolis saw a 41% drop and Massachussets and Illinois saw drops of 28% and 34%.

According to Mr. Streitfeld, aout 4.43 million homes were sold on a seasonally adjusted annual basis in October 2010, compared with nearly 6 million in October 2009. In October 2008, at the height of the financial crisis, about 5 million homes were sold. Distressed sales, including foreclosures, have ben about a third o the market, while first-time buyers ahve ben as much as 50 percent. Both are high by historic levels, reports Mr. Streitfeld.

Mr. Streitfeld reports taht short sales, where the sellers negotiate with their lender to sell thier house and repay less than the full amount owed, are rising in popularity although they are still outnumbered by foreclosures. Bank of America, for instance, said it had agreed to more than 60,000 short sales this year.

It appears to Mr. Streitfeld that the slight drop off in foreclosures is in turn increasing the likelihood of a successful "short sale" – he reports that lenders see themselves under pressure from shoddy documentation procedures, so with all 50 state attorneys general investigating foreclosure procedures, the banks have de-emphasized foreclosrues and have emphasized short sales.

Mr. Streitfeld also notes that there still remains a large "shadow inventory" of more than two million delinquent and foreclosed homes that banks will ultimately have to bring to the market in order to dispose of the homes. For this reason, the sales of previously foreclosed houses has dropped. By way of example, in California, there were 19,925 foreclosed homes sold by the banks in October 2008, and that number had dropped to 15,621 in October 2009, and then down to 10,367 in October 2010.

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