Thursday, May 08, 2008

Bank Bidding War Games

From CBS 13:

If you're looking to buy a home in the down market you may think you're getting a deal on a foreclosure. But beware, the bank may be one step ahead of you. Banks could be in a bidding war to sell you short...Banks find the fair market value on a foreclosed home then list the home for less -- sometimes tens of thousand of dollars less. What looks like a good deal to a potential buyer can spark a bidding war which drives the price back up for the banks and buyers.
Tying to buy a foreclosed home is a nightmarish experience for Dan & Lori. They've waiting days then weeks to find out if their offer was accepted by the bank. "We were told different stories. We were told we were bidding against a certain person, then that there were five other offers," said Lori.
From Sacramento News & Review (hat tip Paranoid Renter):
A year or two back, when the housing market started to go all soft and squidgy, most real-estate agents pooh-poohed the notion of a bubble bursting. Couldn’t happen, they said. Wouldn’t happen. Too much was at stake. Too many people needed the bubble to keep floating along for it not to do so. Then it happened. And in Sacramento, it wasn’t just a matter of the bubble deflating slightly. Instead, it popped, leaving one hell of a mess in its wake. In many parts of the city, housing prices are down about 30 percent from their recent highs. The region has a higher percentage of homeowners in foreclosure than just about any other metro area in the country. We’re in the same club of shame, for Pete’s sake, as Detroit.
From Home Front:
[President-elect of the NAR Charles] McMillan talked about the sometimes strained relationships between the media and real estate agents who think the media has been overly negative. One questioner from New England asked about the image of real estate agents, however, noting that the National Association of Realtors ran full page ads in Oct. 2006 saying that: Now is a good time to buy. The questioner said that anyone who followed that advice in his part of the country has by now lost all their equity. McMillan kind of danced around that one, but it sure sounded familiar.

All during 2006 I recall calls from real estate agents to voice their concern about the tone of coverage as the market started to stumble. Almost always, they said it: Now is a good time to buy. And anyone who took their advice then has seen their values fall pretty hard. I am not saying anyone is always right or always wrong. But just as the media is often charged with having credibility issues, so too, does that apply to the real estate industry.
From the Sacramento Business Journal:
Greater Sacramento's home values have declined 30 percent since the peak of the housing market in fourth-quarter 2005....And almost 70 percent of families in the four-county region who bought their homes in 2006 have negative equity, one of the highest rates in the nation -- but far from the 90 percent-plus rates in Stockton and Las Vegas, according to Zillow. Almost 55 percent of homeowners who bought last year have negative equity.
From the CNNMoney:
The housing implosion is nowhere near over. In 75 of the 100 top U.S. cities, prices are expected to fall in the next 12 months according to Fiserv Lending Solutions...Pity the residents of Stockton, Calif., whose homes are likely to lose more than half of their 2006 value.
From the CVBT:
The U.S. House of Representatives may vote Thursday on a package of proposals designed to rescue the flailing housing industry and homeowners faced with foreclosure...If it were to become law, Congress would have to do something that it has been virtually incapable of doing – overriding a veto by President George W. Bush.
But Central Valley Congressman Jerry McNerney, who has a proposal in the bill to raise FHA mortgage limits, says there may be enough support to cancel a presidential veto. “I don’t know what the President’s going to do but there’s really strong support for this here in the House and I think in the Senate as well,” Mr. McNerney says. “I think we’ll be in good shape to try and override that veto.”


rocklin renter said...

Pity the residents of Stockton, Calif., whose homes are likely to lose more than half of their 2006 value.


DD has been validated by CNN!
(take it fwiw)


Yea, auctions are scams and now these bank repos. Banks will do anything to trick buyers into thinking there is interest in this over valued homes. Don't fall for it. And don't let yourselves think that "investors" will make money by buying into RE now. Do you really think "investors" make money every single time they buy something? Think again, and think for yourselves. Just because some are buying doesn't make it smart, or a wise investment. Remember all the buyers of the tech stocks that bought on the initial down turn on those stocks only to lose their shirts a year later???

mopar777 said...

The recession and the coming alt-a crisis will cause a bottom to occur in the 2011-2012 time period. This puppy is far from barfing on the carpet. I am taking two nice vacations in the next nine mos. and saving my cash at the same time.
No need to worry about 2009-2010 as being the time to buy. But hell, by then this blog will be all but dead.

Diggin Deeper said...

No validation required...just a little balance....

Are these people getting a good deal? All they're getting is today's deal. Tomorrow may be a different story. That's not going to stop the banks from dangling a carrot in front of would be buyers. We're basically over 40% off the highs. The banks are treating their inventories as if shoppers were standing before the "take another 20% off" racks at Macy's. With so many homes to choose from, what better way to stand apart and move your inventory? It's really a form of capitulation...allowing the market to decide what the best price for the times are...

I agree this market has a ways to go before we find a bottom. I just believe that the majority of the discount is already on the table and it won't be quite as deep from here as most believe. Once you take 40% off the next 40 probably doesn't happen...

The solace is that waiting for the shake out is the safe bet, because the market's not going anywhere for quite some time thereafter.

Buying Time said...

I agree DD. In most places the biggest part of the discount has already occured. However in some of the more swanky areas, that discount has just begun (like only 10-15%). I don't think they will drop as much, but I do belive they have farther to go than the areas that have already adjusted.

The foreclosure situation will keep pressure on prices for some time to even if home prices stabilize I don't see appreciation happening anywhere on the horizon.

Diggin Deeper said...

Buying Time....Agreed...what we're being given is basically an average price drop from the high. Since the higher end is vulnerable but way fewer in number, they could take a major hit, pricewise, and not really skew the overall average discounted price much from the high...still anything could happen but at some point we really will be pushing on a string to get that average to move by a quantum amount.

It looks like homeownership, as an equity investment, is gone for awhile. If this was Houston, Texas, it never would have been a consdieration in the first place.

Deflationary Jane said...

There was a REO I looked at in Jan. The listing agent gave us the "multiple bids" line. Instead of making us feeling panic to buy, it made us pass on the house. I'm really glad that we did. We would have put in an offer at 172k. I checked the SacBee site and it sold at 150k.

South Bend, IN is looking really good and St. Louis is now in the running. I'm still crossing my fingers for Durham or Nashville. I'd really like an authentic southern drawl when I get older >; )

Diggin Deeper said...


Go for the drawl...South Bend is great in the summertime but that "lake effect" in the winter is brutal...on the other hand, you could spend $175K and get a nice home...

Deflationary Jane said...


Depends on who gives the better offer and how fast. We just want out now before the outmigration push picks up more steam.

Diggin Deeper said...

Just a thought. Let's say we drop another 20% from here and we push the median price down around $200K. or even further to the $175-180K level. At those prices for a good sized, self contained community in California, would we see an influx of new people to the area? We have a huge retirement bubble that is pushing forward. I know the argument that other states like Fla, Nv, Tx, Wa, have tax advantages, but those are offset by higher property taxes in those states. Is it possible that affordable housing would draw more people to the area?

paranoid renter said...

Is it possible that affordable housing would draw more people to the area?

California is too expensive to be a retirement haven, except for millionaires. I am here mainly because of the combination of job opportunities and weather. The job opportunities are better in the Northeast (in my field) but the weather sucks, and the weather is better in other places like FL, but it's hard to find something interesting on the job front. Unless I make many millions by the time I retire, I won't be living in California.

Patient Renter said...

St. Louis is now in the running

hey, you can stop by the St. Louis Fed and give a bit fat thank you to dem boyz from all of us.

I'd really like an authentic southern drawl when I get older >; )

LOL. The southern thing is something I could see myself wanting to want, but the whole conservative thing there is night and day different from what we're used to here. I dunno if I could handle it.

Diggin Deeper said...

Give me 20,000 of those millionaires and our housing problem starts to lift....

No sense sitting outside at night in Florida or Texas swatting cicadas the size of humming birds.

Cmyst said...

Speaking as one who has lived for years in Texas and the Midwest, and for years now in California:

Yes, if housing prices fall below 200K avg, then people will move here and away from those places.

All places have taxes, either front-loaded or back-loaded. Many of the "low tax" states also don't pay nearly as well, so it ends up being a wash a lot of the time. (NOT "all the time" and not for all jobs.) Food costs are pretty much the same. Utility costs, in my experience, were much worse in the Midwest. Petrol is slightly less expensive, but let's face it: that's a sinking ship that we probably should be swimming away from instead of clinging desperately to.
Many of the problems that people seem to obsess about on the housing blogs are not so much regional problems as problems that all urban areas are going to have.
The biggest problem in Cali is that what is considered a minimal middle-class standard of living is beyond the means of most truly middle-class people. Unfortunately, due to popular culture and our consumer-based economy, that is increasingly not JUST a Cali lifestyle problem.

On the plus side, if intelligent and well-informed people with progressive values move en masse to the South and the Midwest, it will enlighten those areas over time. So, those who are moving there or want to move there -- bless you all, you are doing the work of the angels.