Twin Cities area home buyers in search of a foreclosure don't have much to choose from. But there are plenty of short-sale properties on the market, the Minneapolis Area Association of Realtors reported Thursday.
Foreclosure inventory in the Twin Cities is down 60 percent from last year, falling from 4,886 homes available for purchase at the end of September 2008 to 1,960 available this September. Heavy demand from investors and first-time home buyers looking for a deal in time to receive the federal tax credit have whittled the inventory of foreclosures to a 1.5-month supply. A balanced market has five to six months' supply.
But there is a 13.9-month supply in the short-sale market. In a short sale, banks agree to sell a home for less than the mortgage balance to stave off foreclosure.
Foreclosures are also selling three times as frequently as short sales.
Realtors say the chasm lies in the purchasing process. It can take months for banks to approve a short sale, and consumers often set their sights on another home by the time a short-sale offer is accepted. "It's extremely important for lenders to become more flexible to move short-sale inventory through the system," association President Steve Havig said in a statement.
First-time home buyers hoping to qualify for the credit have been discouraged in recent weeks from considering a short sale because it's unlikely the lengthy approval process would be complete before the Nov. 30 deadline.