NAR’s REALTOR Magazine just released an article about the rising sales price of foreclosures. This should be good news. In a number of cities and states, including my Orlando area market, we have seen an increase in sales prices. What we have also seen is a decrease in supply. Supply of homes for sale over the past year has dropped significantly. The supply of bank owned (REO) properties for sale has dropped even more dramatically over the past year. It is not for lack of supply. Those of us in the hardest hit states (FL, AZ, NV, CA) don’t need to drive too far before seeing a vacant home that has been owned by a bank for months or more that is just sitting, sitting, sitting. On a personal level, I have a neighbor who has been living in a home that has been owned by Bank of America for about 2 years now. When they will list it for sale is a mystery.
This limited supply of inventory has caused frustration for many buyers in the market. There is not as much to chose from as there has been in the past and competition is fierce. Multiple offers abound and cash buyers often beat out buyers who are in need of financing to secure a home. This lack of supply has helped to prop up the market and bring us some increases in sales prices.
Banks have been controlling the real estate market for a while now, and it seems they like to go to extremes.
When the market first crashed, banks flooded us with inventory and values plunged to a disgustingly low level. Now, banks are doing the opposite. Banks have a strangle-hold on inventory and are trickling it out to the public ever so slowly. The inventory they are releasing to the public is being priced 10-20% above market. Some of the inventory is move in ready which may help justify paying a little more for a property that needs nothing but there is a portion of this overpriced inventory that really needs some work – new roofs, work on plumbing, significant updates. No matter how you slice it, these properties are not worth the price they are being listed at. I understand the logic behind it, but really? What ever happened to moderation. Let’s get a supply out there that matches demand so we can really get down to stabilizing our market.
Instead, banks trickle out supply to try and get the general public to pay top dollar for a new home or investment property while privately selling properties in bulk to investors (possibly cronies?) at rates below market. Doesn’t seem right to me….