Lender owned properties are dominating our market
A year ago, on July 9, 2008, I blogged about investors entering the Palm Springs Real Estate market. Spurred on by an increasing number of foreclosures, that market trend presented low prices and thus a good opportunity for investors. With our economy in turmoil and foreclosures on the rise, we were just beginning to see an increasing number of investors coming into our market.
What appeared to be a trickle of investors last year has now become a torrent today. What is absolutely amazing to me is not only the large number of potential buyers, comprised of both investors and first time buyers, but also the speed at which foreclosed properties are currently being sold.
Prices are being bid up
As foreclosed properties came on the market last year, most new listings just sat there as potential buyers and sellers worked hard to find an agreed-upon price point. Often a bid at the listed price was good enough to get the deal done. Now in 2009, we are finding that more and more sellers of lender owned properties, known as REO’s (Real Estate Owned), are requesting “best and final” bids, because there are multiple bidders chasing a single property. The result in 2009 is just as it was at the market price peak back in 2006; prices are being bid up over list price, often dashing the hopes of many would be buyers. These properties are not luxurious; rather they are primarily “fixers” at the bottom of the food chain. Now this doesn’t necessarily mean we will see list prices all of a sudden start to increase, but it does slow down any potential free fall in prices.
REO inventory is shrinking
Although new REO listings come on the market almost daily, I get the impression that the overall inventory of REO’s is falling. I suspect there are several factors at work here. The pace of sales is increasing rapidly with time-on-market measured in days, not in weeks. Although I can’t prove it, I also see a lot of bank owned properties sitting idle without a listing broker, which leads me to suspect that lenders have learned that streaming their REO’s slowly into the market and limiting the growth of inventory is keeping their sales prices up. In any case, there seem to be a lot more buyers chasing fewer and fewer lender owned properties. We have all read the dire forecast of continuing foreclosures and continuing downward pressure on prices. So until our economy turns and unemployment decreases, we should expect to see more of the same.
Searching aids
Several Web sites have sprung up to help you search for foreclosures – by state, county and then cities within that county. Web sites like www.ushud.com and www.allhud.com show comprehensive listings of foreclosures. They are completely free – all the time, and they offer you contact information for a knowledgeable local agent who can help you. Many other sites which advertise themselves as free are actually free for a $1 seven day trial period, after which they charge in the range of $39 to $49 a month.
At any rate, once you begin looking to buy in earnest, just be prepared to move fast when you find an interesting property, because you will not be the only one looking at it.