Incomplete Short Sale Foreclosures Hinder Market Recovery

December 27, 2010 by Anthony Parker on Foreclosure Crisis

Although existing housing unit sales improved in California in November 2010, the state's residential property industry still failed to mount a sustained recovery. Part of the reason, analysts have stated, is the lack of short sale foreclosures which can help eliminate hundreds of abandoned and empty properties in the region.

Sales of existing houses in the state, including Los Angeles foreclosed homes, CA, surged by more than 9% in November 2010 compared with October 2010. However, when compared with the same month of 2009, sales recorded a decline of 8.6%. This is not as bad as it seems, according to analysts, since previous year's sales figures were artificially inflated by the federal government's tax credit program.

However, analysts stated that the region's housing market would have fared better if more short sale transactions were completed during 2010. According to them, short sales are better for sellers, lenders and the whole housing industry than California foreclosures. They also stated that there were considerable numbers of short sale transactions initiated during the month, but almost half of them failed to reach the closing stages.

Data for California home sales showed that around 40% of attempted transactions involving short sale foreclosures fail to reach the end stages. They stated that the difficulties involved in processing such transactions are the main reason for the failure of the parties involved to complete the transactions. They added that for the most part, it takes several months for the lender to issue an approval which often frustrates potential buyers and prompts them to turn their backs on the agreement.

Aside from short sales failing to cut down the number of distressed properties in California, sales of foreclosed homes have also tanked for the most part of the year's second half. Majority of house buyers are said to be wary of purchasing foreclosed dwellings due to controversies surrounding their processing and because of unemployment fears.

High-end home markets are also not doing much better than short sale foreclosures and foreclosed property sales. Several key residential areas in California are still considered expensive, with median prices ranging from $600,000 to more than $1 million. Realtors reported that buyers who have the means to purchase high-end homes are usually turned off by the high prices of properties in California compared with other states.

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