In an effort to jump start the real estate market, the federal government has recently expanded and extended the tax credit for homebuyers. Many imagine that getting buyers to show up will do the trick, given that there is a mammoth supply houses listed for sale. Unfortunately it's not that straightforward. These days a lot of would-be homeowners find that they are not the only buyer when they make an offer on a property. That’s because there are few properties accessible to a young family trying to qualify for a loan with a small amount down. The owner's situation limits the sort of consumer they can sell to.
Bank Inventory
There is a huge inventory of properties owned by banks available right now, and the near future will bring more. lenders want to sell homes quickly once they've finally completed the prolonged forclosure process, obtained clear title and moved any residents out. They offer it at or below market value and accept an offer that will close quickly, even if it’s not at the highest price. As a result they’re selling to investors who can pay cash, or at least have a significant down payment and a lender ready to go.
Short Sales
Many homeowners who owe more on their mortgages than their homes are worth try to sell their houses as a short sale to save their credit. The lender must agree to accept less than the loan balance as payment in full in order for this sort of sale to be accepted. Lenders would rather not to do this, and often allow a home to be foreclosed before accepting a short sale. It often takes months and months to get approval – if ever. Buyers are making low offers on short sales, knowing that if they can hold out, they may eventually get the home. Investors are much more likely to accept such a scenario than are people who need to find a home to live in.
Brand New Construction
New home builders are not building as many new houses as they once were. They are able to hold off and wait to develop their land when prices appear to be on the rise. But they are building and selling some homes, and these are a great option for would be homeowners.
Normal Sales
A good number of homeowners who owe less than their house is worth are sitting tight. They understand that home prices have fallen a lot since the highs of a few years ago. They expect prices to rise again after the market reaches the bottom and all the short sales and foreclosures have worked their way through the system. A few know that it’s an ideal point in time to move up – if they have stable income. Values of larger homes have decreased more than their house has, so they can do well by buying and selling in a down market.
Homes Available to Would-Be Homeowners
A good number of consumers buying a home to live in need to put together a minimum down payment and qualify for a home loan. This process is time consuming, and occasionally deals fall out of escrow. Recent changes to appraisal rules have made the situation more challenging. Mortgage companies will only loan up to 80%, 90% or 96.5% of the appraised price, and in recent months appraisals have been under the agreed price. Most distressed sellers do not have the luxury of waiting for a purchaser to go through this process, particularly when there’s a real chance they won't be able to close at the end. So, they’re accepting offers from cash buyers. Some sellers take a very long time to get bank agreement on a sale. This doesn’t work well for a buyer who needs a place to live. This leaves the few equity listings and new construction as the only logical options.
Where is This Problem the Most Evident
The geographic areas that are most affected by this phenonmenon are those that experienced overstated values before everything went south, including houses in Phoenix or Orlando, new homes in Chula Vista and any homes in areas where sub-prime home loans were common. Anyone trying to buy Orange County, Riverside or San Diego new homes will learn shortly that Southern California is one of the most affected markets. It was also one of those most in need of a return to reasonable prices.
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