Monday, April 9, 2012

Pent-up Demand for Housing Leading to Bidding Wars

Pent-up Demand for Housing Leading to Bidding Wars

If you have noticed fewer For Sale signs in your neighborhood, you are not alone. Fewer and fewer houses are available for sale.

The housing market is starting to see the return of something we haven’t seen for six years — potential buyers engaged in bidding wars for homes. In a recent article, Bloomberg.com reported the story of one couple that offered $10,000 more than the asking price for a home and included a family portrait along with a letter detailing their desire to live in that neighborhood. They lost out to one of seven other bidders.

We haven’t seen a lot of bidding wars in Georgia yet, as our unemployment rates are still in recovery mode. But I predict they are on their way as there is definitely a pent-up demand for housing. There are several reasons for that, starting with the fact that homebuilders have pretty much stopped building new homes over the past four years. And many of the homes that are available are in bad condition, as they may have been short-sold or foreclosed on, and routine maintenance and repairs have not been done.

Plus at the end of 2011 around 22% of mortgage-holders in the United States are underwater on their homes, with Georgia (33%) and Florida (44%) being among the states with the highest level of negative equity, according to a release from CoreLogic. A lot of these homeowners are reluctant to put their homes on the market, knowing they would have to come up with a large check at the closing, should their home sell.

Consider this: 2.43 million homes were listed for sale in February, according to a recent report from the National Association of Realtors. That is about a third of the number of homes available for February in 2005, when U.S. home sales were at a record 7.08 million.

These conditions have led to an interesting trend we are seeing at Southeast Mortgage. In the past consumers would generally find a home they wished to purchase, sign a contract and then apply for their mortgage. Now we are seeing a large volume of applications for “To Be Determined” properties. Consumers are ready to buy and are getting pre-approved for mortgages, but are having a harder time finding an available and desirable property for purchase.

One big advantage of pre-approval, however, is that if you do find yourself in a bidding war for a home, your offer will carry a lot more weight than potential buyers who are not pre-approved. And you don’t even need to include a family portrait.

Cal Haupt, President and CEO of Southeast Mortgage

1 comment:

FredYancy said...

It has been my experience in Atlanta, and surrounding areas, that my clients who are bidding on HomePath properties have been bidding $5,000 to $10,000 over asking and still loosing in a multiple offer bidding war. I have one client in particular who has already lost 12 homes in bidding wars.