Fewer homeowners in the Washington region are underwater, and fewer short sales are on the market.
While the number of distressed properties in the region’s for-sale inventory continues to decline, the length of time it takes to process a short sale remains longer than either a foreclosure or a traditional sale. (Short sales are homes where the sale price is less than what is owed on the mortgage and involves a negotiated process with the lending institution.)
According to data from MRIS, between January and October, short sales comprised just under 11 percent of all sales in the Washington metropolitan area. Foreclosures accounted for less than seven percent of 2012 sales. During the first 10 months of 2011, short sales made up nearly 16 percent of sales and foreclosures were another 19 percent. The supply of short sales is greater in local markets that have been slower to recover. For example, nearly one-quarter of sales in Prince George’s County were short sales. (And another 17 percent were foreclosures.) In the District, short sales were only four percent of sales.
Short sales have become easier in many ways, which is a major reason they are a growing share of the inventory while the number of new foreclosure listings is steadily declining. However, negotiations among the parties involved in a short sale can be uncertain, and short sales fall through more often than other types of sales.
As a result, short sales continue to take longer to process than either standard sales or foreclosures. Short sales in the Washington metro area sold in an average of 82 days, compared with 62 days for foreclosures and 64 days for sales that were neither a foreclosure or short sale.
There is substantial variation across the region in terms of the length of time short sales take to go from listing to sold. For example, in Arlington County where there were just 53 short sales in 2012, the average time on the market was 120 days, compared with 53 days for standard sales. In Montgomery County, short sales were on the market an average of 86 days, compared with 65 days for standard sales. In Fairfax County, on the other hand, the average time on market for short sales was 53 days, compared with 51 days for standard sales. And in Loudoun County, short sales sold in an average of 60 days, the same as standard sales.
Rising home prices are leaving fewer homeowners underwater, with fewer feeling pressure to sell their homes for less than they owe on it. The inventory of distressed sales will be a smaller and smaller segment of the Washington metro inventory. However, short sales likely will linger on the market longer and contracts will fall through more often than either foreclosures or standard sales.
Lisa A. Sturtevant is an assistant research professor at George Mason University’s Center for Regional Analysis.