The Ups and Downs of Short Sales

Jonathan Lansner and Jeff Collins of the the Orange County Register reported stunning numbers, through May,  about the Southern California housing market.  Short sale transactions are up 74 percent in Southern California this year (Orange, Riverside, San Bernadino, and Los Angeles counties).

While short sales tend to hurt property values*, increased short sales are likely a good development for an area like Southern California that saw a massive inflation in housing prices during the bubble years.  The increase in short sales serves several constructive purposes:

  • It removes housing inventory from the market, which is a key to some sort housing recovery.
  • It allows underwater home owners to shed onerous debt on houses which will take years to get back to their peak values, if they ever do.
  • The decrease in prices allows many of those who were priced out of the market in the mid-2000s the opportunity to purchase a home.
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