Lack of Homes Obtainable for Typical Buyers

30 Jan

Posted by Horace Lenning as Real Estate

The tax credit for buying a home was recently extended and expanded in an effort to jump start the real estate market. Many believe that bringing willing buyers back to the party will do the trick, seeing as there is a huge supply homes ready to be sold. That really isn’t the case. These days many real estate buyers find themselves in multiple-offer situations when they make an offer on a property. That’s because there is a sparse selection of houses accessible to home buyers who want to put 10% or less down and qualify for a loan. The kind of purchaser who is able to buy a home is limited by the seller’s situation.

Foreclosures

A large inventory of bank inventory is listed at the beginning of 2010, and the months until all the delinquent loans have worked their way through the system will bring more.

lenders want to sell homes immediately once they’ve finally completed the prolonged foreclosure process, obtained clear title and moved any residents out. They offer it at or below market value and accept a buyer that will close quickly, even if it’s not at the highest price. Consequently that buyers who can pay cash, or at least have a large down payment and preapproval, get the house. These are typically investors.

Foreclosure Avoidance Sales

Many homeowners who owe more on their mortgages than their homes are worth try to sell their houses as a short sale to salvage their credit. This kind of sale must have the approval of the mortgage company which is going to accept less than the loan balance as payment in full. Unfortunately lenders usually aren’t eager to approve such sales. 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. This is a sale that’s more suited to investors than to homeowners who need a place to live in a reasonable amount of time and with some predictability.

Brand New Construction

Home builders have slowed down construction in these difficult economic times. They can wait and not develop the land they own until prices rise. But they are building and selling some homes, and these are a great option for would be homeowners.

Normal Sales

If a homeowner has equity in his home, they often choose to wait. They recognize that home values have fallen a lot since the highs of a few years ago. They look forward to prices rising again after the market hits bottom and all the short sales and foreclosures have worked their way through the system. A few are figuring out that it’s an ideal time to move up to a bigger home - if they have stable income. They’ll do well because values of better properties have weakened more than prices of less expensive homes There are also those few who have to sell due to a relocation.

Homes Available to Would-Be Homeowners

Many people purchasing a home to live in have to put together a minimum down payment and get a mortgage loan. This doesn’t happen instantly, and sometimes sales fall out of escrow. Recent changes to appraisal rules have exacerbated the situation. Banks will only loan 80%, 90% or 96.5% of the appraised value, and in recent months appraisals have been coming in below the agreed price. Many sellers do not have the opportunity to wait for a borrower to go through this process, particularly when it’s a real possibility that they won’t qualify for the loan in the end. Consequently, they’re selling homes to buyers who can bring a significant down payment to the sale. Some sellers take a very long time to get lender agreement for an offer. This doesn’t work well for a buyer who needs a place to live. This leaves a small number of equity listings and new homes as the only logical options.

Which Markets are Seeing this Problem

The most impacted geographic areas are those that experienced overblown values before everything went south, including houses in Las Vegas or Tampa, new homes in Chula Vista, and any homes in areas where sub-prime loans were common. Anyone trying to buy new homes in San Diego, Los Angeles or Riverside will shortly learn that Southern California is one of the worst housing markets. Co-incidentally, it was one of those in desperate need of a return to affordable home prices.