Sunday, June 11, 2006

When Defaults Pull A Neighborhood Down

The Cincinnati Enquirer has this on one area beset with defaults. "Avondale had the biggest drop in average price, down 37.4 percent from 2001 to 2005 and nearly 20 percent from 2004 to 2005, to $100,478 last year. The price decline came as sales rose nearly 57 percent in Avondale in that period."

"The high number of foreclosures in Avondale could be partially to blame for pulling down the average price so dramatically."

"(Broker) Tom Steele said while Avondale and North Avondale, which the MLS counts as one area, includes many homes that sell in the range of $200,000 to more than $600,000, more homes priced below $60,000 that typically are bank-owned or foreclosed-on represent a larger portion of the area's sales."

"In 2005, for example, he said 39 out of 116 homes sold in Avondale and North Avondale, 34 percent, were bank-owned homes averaging $40,000. When banks resell foreclosed homes, they often get only 50 percent to 70 percent of what comparable houses would bring."

"'As with other areas, once those foreclosures have been rehabilitated and resold, the Avondale market will recover,' Steele said."

"Crime also is a factor in Avondale's steep decline, according to Menelaos Triantafillou, associate professor of planning at the University of Cincinnati. Last year, Avondale had 13,358 calls for police service, more than double nearby neighborhoods such as Bond Hill and Roselawn, according to Cincinnati police records. Avondale also had more homicides, robberies and aggravated assaults and burglaries than its nine immediate neighborhoods."

"Crime deters people from moving to Avondale or from investing in their houses there, and the lack of demand drives down home prices, said Triantafillou."

"The big increase in the number of houses sold even as the average price dropped may indicate that people are selling their homes and moving away because they fear home prices will continue to drop, Triantafillou said. Homeowners also could be selling those homes to investors mainly for rental purposes, further pushing down prices."

"'A 37 percent drop in home values is extremely high for one community, and it's an alarming trend,' Triantafillou said."


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