subject: Not Enough Homes Obtainable For Typical Buyers [print this page] The California homebuyers tax credit was recently extended in an effort to get the residential real estate market moving again. Most people think there is a huge supply houses ready to be sold and the only thing missing is buyers . That really isn't the case. Many consumers write an offer on a property, only to find that they are not the only one who wants to buy it. That's because there are very few houses available to home buyers who want to put 10% or less down and qualify for a loan. The seller's situation dictates the kind of buyer they can sell to.
Bank Inventory
A significant inventory of homes owned by banks is on the market right now, and they will continue to flood the market in the months to come.
When lenders have finally completed the foreclosure process and they have clear title to a vacant home, they want to get it sold immediately. They price it to sell and agree to a buyer that will close quickly, even if it's not at the best price. This means that buyers who can pay cash, or at least have a large down payment and preapproval, get the house. These are typically investors.
Pre-Foreclosure Sales
Many homeowners who can't sell their properties for more than their loan balance try to salvage their credit with a short sale. This type of sale must have the approval of the mortgage company which is going to accept less than the loan balance as payment in full. Lenders would prefer not to do this, and often allow a home to be foreclosed before accepting a short sale. Buyers often wait months for bank approval, and may never get it. Those who can afford to wait and don't mind the uncertainty of not knowing whether they'll get the house usually make low offers on short sales. Investors are much more likely to accept such a scenario than are people who need to find a home to live in.
New Homes
Home builders have slowed down production in these challenging economic times. They are able to hold off and wait to develop their land when prices appear to be on the rise. There are some new homes available, and home builders are often very willing to work with buyers who are short on cash and need a lot of time.
Equity Sales
Many people who can afford to continue making their house payments are not moving. They understand that values have fallen a lot since the peak 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 realize that it's an ideal point in time to buy a larger home - if they can afford to do so. Prices of larger homes have weakened more than their property has, so they come out ahead by buying and selling in a bad market.
Homes Available to Would-Be Homeowners
Most consumers buying a home to occupy must scrape together a down payment and get a home mortgage. This process takes time, and sometimes deals fall out of escrow. Recent changes in appraisal rules have made things worse. Banks will only loan 80%, 90% or 96.5% of the appraised price, and in recent months appraisals have been coming in lower than the agreed price. Most distressed sellers don't have the opportunity to wait for a buyer to go through this process, especially when there's a good chance they won't be able to close at the end. Consequently, they are accepting offers from investors instead. Some sellers take an extended period of time to get lender consent for a proposed deal. This just isn't an option for a family in need of a home. This leaves a relatively small selection of equity listings and new construction as the only reasonable choices.
Which Markets are Experiencing this Problem
The real estate markets that are most affected by this phenonmenon are those that saw exaggerated home prices just before the troubles began, including houses in Phoenix or Albuquerque, new homes in Chula Vista, and any homes in areas where sub-prime mortgages were prevalent. Anyone trying to buy Orange County, Los Angeles, Riverside or San Diego new homes will discover soon that Southern California is one of the hardest hit markets. Co-incidentally, it was one of those in desperate need of a return to affordable home prices.
