I’ve been thinking that banks have a new role in this real estate market that is creating a vicious cycle. Many homes are being foreclosed upon because the owners can no longer afford the payments (for a variety of reasons). They go to public auction, the banks ask too much for them there so no one bids on them, they go back to the bank, then the bank puts them on the market 4-8 weeks later for a low, low price because obviously they want to get rid of them – FAST. The homes receive multiple offers within a couple weeks, and the home sells for a low low price – lower than anything else in the neighborhood. This in turn, counts as a comparable home, and brings the value of all the other homes down, which in turn, makes it more difficult for owners to sell their homes. And so those that cannot afford their homes any more, cannot sell them, and thus are forced into foreclosure. And thus the cycle begins again.
Even if a person can still afford to pay their mortgage, but needs to sell for any other reason (moving??), they may have to sell it for less than they owe, which creates a short sale scenario, which again drives comparable values down….AND, banks will rarely even consider a short sale, unless you’ve stopped paying your mortgage. (WHA??)
Now I agree that home values were overinflated for a few years, but is there a possibility that homes will be undervalued in years to come because of the scenario I just outlined? For example, one of the homes that sold recently that was owned by the bank, 13 Wentworth, just sold for $20,000 LESS than it sold for in 1999. 1999!!! Is there a new price/value disconnect? Are banks creating their own problem?