By John Hines
A surge in multiple offers to buy homes is sweeping the country and pumping up home sales. The Obama administration’s housing plan is beginning to make an impact from Fort Meyers Beach, Florida to the Great Lakes all the way across to hard hit California.
In Sacramento, California where the housing crisis may have found its roots, foreclosures and bargain priced properties listed for sale by lenders have increased transactions 45% from this time last year. First time home buyers and bargain hungry investors, who are traditionally harbingers of a recovery, are buying up homes and condos at prices that haven’t been seen in more than a decade.
Buyers are also picking up deals in Fort Meyers Beach, Florida. Home and condo sales are up more than 100% from a year ago because of the lower prices. A dozen condos are listed for sale below $20,000. The volume of sales has topped that of the real estate boom in 2005 by more than 100 units a month.
Increasing home sales are also in Las Vegas, Nevada perhaps the harshest hit market in the country, Southern California’s Inland Empire, Detroit, Michigan home to the troubled automakers and dozens of other markets.
A Housing Predictor analysis determined that an estimated 1.4-million foreclosed homes not yet listed for sale on lenders books are awaiting the process to be marketed for sale. The inventory will provide lower cost housing for buyers to purchase. The so-called phantom inventory of foreclosed homes, condos and other properties coupled with funds from the government’s Toxic Asset and Relief Program (TARP) are pushing lenders to slash prices to get properties sold. Funds from TARP provide lenders with part of the money they would otherwise lose due to foreclosures. The program is part of the administration’s program to re-stimulate the economy.
In Phoenix, the market is picking up steam and multiple offers on homes priced under $200,000 are commonplace. In Tucson, the market has seen a higher pace of sales for three months as homeowners drop asking prices to where they need to be to sell to compete with lenders lower-priced properties. Multiple bids are most common under the $150,000 price point.
The federal $8,000 tax credit for first time home buyers, which expires December 1st is getting buyers off the fence. In Fayetteville, Arkansas Christen Trolinger borrowed a down payment from relatives to get into her first home. Before settling on the home she picked, Trolinger looked at 85 homes before buying one for just under $90,000, which is representative of first time buyers spurring the markets fever.
Price conscious first time buyers are key to the housing market’s recovery, and they are purchasing foreclosures despite properties often being rot with problems to get into their first home and declining values. Outside Chicago, multiple offers are also being made on homes in the lower price ranges priced by lenders to attract a lot of attention for a quick sale. A series of offers made on a small 2-bedroom home listed at $39,900 produced a sale at $59,000.
Lower demand for higher priced homes still, however, staggers most markets. Multiple offers produced rising prices during the real estate boom. But the mania exhibited in this frenzy seems to be more restrained. Properties in higher price ranges aren’t seeing the demand yet to demonstrate a prolonged recovery. However, growing market forces are at work to produce more sales activity, including falling home values triggered by record foreclosures and near record low mortgage rates.
John Hines is an Economist who works and writes about real estate for Housing Predictor.