Foreclosure is the "F" word of the real estate business. While to buyers the conotation is bargain, the reality is that foreclosures drive up the cost of loans, make it harder to get financing at all, and depress the supply of other homes on the market that might actually be better selections anyway by lowering average prices. Obviously the affect on sellers is even worse, the foreclosure down the street that sits week after week sure makes it hard to get what a house might truly be worth without it.
Case in point, yesterday I was showing homes in the low 200's, and a couple in the upper 100's. Of 8 homes we set out to see, only 6 would allow showings, and of those, 3 were foreclosures. One needed at least $20,000 in fixups AFTER the bank had already done their best, another maybe only $10-15k. One appeared pretty "run ready" and priced very well, but there were still stipulations that no inspection or financing contingencies would be accepted, so the buyer had to spend some money of their own before they even could know if they were going to get the house. These are risks that many buyers who are stretched for their "cash to close" are not going to be willing to take, even though the house may appear to be a "steal".
Foreclosures make up about 12.5% of our inventory currently, or about 1 in 8 homes on the market. The bulk of them (although certainly not all) seem to be concentrated in the Fountain Valley (15.3% of the total), Southeast (11.4%), Powers (7.8%), East (7.4%) and Central (6%) areas, with the rest kind smattered around the city. Quite a few seem to be on the newer side (not in the East or Central areas), likely buyers who could barely afford the house to begin, couldn't afford the lawn and window coverings after closing, and with either an interest rate bump or a job, medical, or realtionship situation, pushed them over the edge.