After months of denying reality, lenders are finally slashing prices to the point that buyers are interested in buying -- in fact, interest has risen to the point that there are now bidding wars for some of these properties. Could that bring the end of the housing bust faster? From an AP story via MSNBC.com:
Lenders stung by the housing bust are slashing prices dramatically to rid themselves of an unprecedented number of foreclosed properties, sparking bidding wars in some places that harken back to the market's go-go years and may signal the bottom is near.
The trend is most dramatic in many parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously. Sales of foreclosures, vacant new homes and other distressed properties now dominate some markets, causing grief for individual homeowners who need to sell for other reasons, like a job in a new city.
Nationwide, one out of every four sales between January and March was a distressed sale, and that figure jumps to more than 50 percent in the hardest-hit areas like Las Vegas, Detroit and distant suburbs of Los Angeles, said Mark Zandi, chief economist at Moody's Economy.com. The number can be as high as 90 percent in some newly built subdivisions, where loose lending standards and speculation ran rampant, real estate agents say...
By setting prices at extraordinarily low levels, say, $175,000 for a house that sold for $350,000 three years ago, banks can spark multiple offers.
"It's not uncommon to have 10 to 20 offers on one house, and for the house to end up selling for more than its market price," said Erin Attardi, a Sacramento Realtor. The strategy, she said, allows the bank to be selective, picking buyers with solid financing or those able to pay in cash...
Investor demand could be swamped by the foreclosures expected to hit the market over the next year.
A record of almost 3 million American homeowners were at least one month late on their mortgages in the first quarter, the Mortgage Bankers Association said Thursday. And another record of almost 450,000 had entered the final stage of foreclosure...
Some in the real estate industry see such competition as a sign that the housing market's gloom is lifting...
For real estate agents, helping banks sell off properties is one of the only flourishing businesses these days. But it's not for everybody.
Agents can easily pay hundreds of dollars a month on upkeep — including utility bills, cleaning and lawn care — and must go through the hassle of getting reimbursed by the bank. They sometimes have to evict homeowners, tenants or squatters. And in many cases, they have to deal with vandalism or theft of everything from copper pipes to appliances and air conditioners.
Jeff Dolfinger, a broker in Poughkeepsie N.Y., who specializes in managing and selling foreclosed properties, estimates that about 90 percent of those homes in his market are being bought by investors.
"To them, this is the best real estate market ever," he said. "They'll wait for this turmoil to end and they'll put the properties right back on the market again"...
A quick way for a lender to dispose of properties is through an auction. However, lenders lose an average of 56 percent of a property's value through auctions, compared with a 40 percent loss for ordinary sales, according to a report last month by Fitch Ratings.
Nevertheless, the report found that the use of auctions has been rising as lenders try to cope with rising inventory.
Some are more hesitant to cut prices. Chris Bowden, vice president of HomeSteps, a division of Freddie Mac that handles foreclosure sales, says being too aggressive on price can affect the value of nearby properties, which sometimes are also owned by Freddie Mac.
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