Keepin' It Real Estate: Just How Hot Is the Housing Market?
Getting to the "bottom" of the housing market.
Existing home sales: Up.
New home sales: Up.
Pending home sales: Up.
Home prices: Down, but at a slower pace.
Even a relic from the booming housing markets of yesteryear has reappeared: Bidding wars.
To be sure, multiple-offer situations are concentrated in lower priced markets, but some sales are simply mind-boggling. Here's a sampling of just how out-of-whack supply and demand truly are in some of this country's real estate markets:
Costa Mesa, California: Home gets a whopping 68 offers and sells for nearly $100,000 over asking (list price of $399,000, sale price of $495,000).
Manatee County, Florida: Home gets 27 bids, list price $124,000.
Phoenix, Arizona: Home gets 11 offers, sells for 50% above list price (listed at $70,000, sold over $110,000).
Even Canada is getting into the act: A bidding war in Vancouver drove one home up to $1.1 million -- almost $300,000 above its asking price.
Talk to most real estate professionals and it's the same story: Cash-flush investors and first-time home buyers armed with a federal tax credit, low interest rates, and 3% down-payment loans courtesy of the Federal Housing Administration are bidding up properties with reckless abandon.
So it's settled then -- we're at the bottom, right?
Unfortunately, probably not.
Before we get too excited about these bidding wars indicating a bottom for the broad housing market, it's important to consider that these situations are heavily concentrated in areas where home prices are low. The trend is far from prevalent in mid-tier and high-end markets.
Lower priced homes are typically easier for investors to flip into juicy returns and require a smaller cash outlay, which opens the playing field to those without deep pockets. Further, cheap homes attract first-time buyers, who can be more easily swayed into bidding above list by commission-hungry Realtors.
In addition, big banks like Wells Fargo (WFC), Bank of America (BAC), JPMorgan Chase (JPM), and Citigroup (C) are still holding back the majority of their foreclosure inventory from the market. This is partly due to the "soft moratoria" ordered by the White House along with banks being reticent to take big losses on homes that have tumbled in value. This is keeping supply low, frustrating would-be buyers into bidding aggressively with so little inventory to choose from.
Meanwhile, as readers of this column should know all too well, higher-end markets continue to struggle, as jumbo mortgages remain a chore to qualify for and down-payment money is nigh impossible to scrounge together for all but the most qualified buyers.
This dichotomy in the marketplace means now more than ever, anyone considering buying a home should live by the over-used adage that real estate is always local. Markets adjacent to one another, separated by nothing more than a school district line, could be headed in opposite directions -- and it may be that the "good" area is far riskier than the "bad" one.
The information on this website solely reflects the analysis of or opin=
=3D =3D3D ion about the performance of securities and financial markets by =
the wr=3D iter=3D3D s whose articles appear on the site. The views expresse=
d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi=
a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web=
site is intended to con=3D stitute a recom=3D3D mendation or advice address=
ed to an individual investor =3D or category of inve=3D3D stors to purchase=
, sell or hold any security, or to =3D take any action with re=3D3D spect t=
o the prospective movement of the securit=3D ies markets or to solicit t=3D=
3D he purchase or sale of any security. Any inv=3D estment decisions must b=
e made =3D3D by the reader either individually or in =3D consultation with =
his or her invest=3D3D ment professional. Minyanville write=3D rs and staff=
may trade or hold position=3D3D s in securities that are discuss=3D ed in =
articles appearing on the website. Wr=3D3D iters of articles are requir=3D =
ed to disclose whether they have a position in =3D3D any stock or fund disc=
us=3D sed in an article, but are not permitted to disclos=3D3D e the size o=
r direct=3D ion of the position. Nothing on this website is intende=3D3D d =
to solicit bus=3D iness of any kind for a writer's business or fund. Mi=
ny=3D3D anville mana=3D gement and staff as well as contributing writers wi=
ll not respo=3D3D nd to em=3D ails or other communications requesting inves=
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter