Bidding wars could signal home sale recovery

by The Real Estate Faction on July 6, 2012

By JEFF COLLINS / THE ORANGE COUNTY REGISTER

When Andrew and Natalie Austin began shopping for a home last fall, they weren’t prepared for war. But that’s what they got.

Bidding wars were so common, they got outbid on three homes before someone finally accepted their offer on a two-story Mediterranean in Anaheim Hills.

“We would put an offer in, and within 24 hours, cash buyers would come in,” Andrew Austin said. “It was frustrating.”

Century 21 agent Valentina Sharp had the opposite problem when she entered a four-bedroom, three-bath house in Fullerton into the multiple listing service on a Friday night back in May. By noon the next day, she had the first of three offers. Within four days, the house sold for $11,000 more than the asking price.

“There are so many buyers out there, and so few homes,” Sharp said. “If you prepare it, and it’s priced right and it shows right, you always get multiple offers.”

How things have changed.

After several false starts, housing experts are cautiously optimistic that a housing recovery might, just might, be under way.

Foreclosure rates are falling, and inventory – the number of homes for sale – has dwindled to pre-recession levels, they say. Interest rates are five percentage points below the historic average, homes are more affordable than ever and prices appear to be bottoming out.

All that has propelled hordes of smart buyers back into the market and created bidding wars for the most desirable and aggressively priced homes. Multiple offers are occurring across the board, affecting not just bank-owned foreclosures and underwater “short” sales, but standard sales of “non-distressed” homes as well.

Housing bear Stan Humphries, chief economist for Zillow.com, is among those seeing signs of a turnaround. For years, he warned that the market still was far from bottom.

“I feel a little more positive about the housing market,” Humphries said at the National Association of Real Estate Editors conference in Denver nine days ago. “We see a lot of markets that have hit bottom.”

Even more enthusiastic was National Association of Realtors Chief Economist Lawrence Yun.

“The market is healing,” Yun told reporters at the NAREE conference. “This time next year, there could be a 10 percent price appreciation. I would not be surprised to see that.”

SALES SPRINGING BACK

DataQuick numbers bolster the optimism.

During the spring home buying months of March through May, 9,055 Orange County homes have changed hands this year. That’s up 17 percent from the spring of 2011, and it’s the strongest spring sales tally in six years.

Low prices are helping to fuel that demand.

The average median home price – or price at the midpoint of all sales – was $418,333 this spring, 2 percent below spring 2011 and the second-lowest spring price since the mortgage meltdown in 2007.

But even prices could be rebounding this year. For the first time in 18 months, May’s median home price for Orange County was higher than the same month a year earlier, according to DataQuick.

“House prices are increasing again this spring,” said Mark Fleming, chief economist of data giant CoreLogic. “They’re doing it much differently than in years past because there’s a much more fundamental supply-and-demand balance nationally.”

Coldwell Banker broker Scott P. Brady, president of the Anaheim-based Pacific West Association of Realtors, said local agents were surprised at how quickly the market turned around this spring – particularly at the lower-priced end of the market.

“Buyers collectively woke up one day and said it’s cheaper to buy than it is to rent. (Mortgage) rates are at all-time lows, prices are down 30 percent from the peak for single-family homes, and you put those two together … anybody who can buy a home, flat out wants to buy a home,” Brady said.

“It may be anecdotal, but my belief is, and I’ve talked to pretty much everybody, homes that couldn’t sell six months ago at a certain price, now sell very quickly at the same price. I certainly think that in the last six months, we’ve seen prices not only bottom out, but probably go in the other direction.”

There are new headaches.

Agents noticed that rising prices make it harder to get a loan appraisal that’s high enough since appraisals are based on past sales – some as old as six months ago, when prices still were in the doldrums.

“The biggest concern you get now when people sell a home is will it appraise,” Brady said.

BOTTOMING OUT

Tolga Tarhan, 30, voted with his wallet that the housing market finally has hit bottom.

Tarhan, co-owner of NetBrains, a software engineering firm, and fiancée Jackie Williams, 28, made a down payment on a brand new condo in the Irvine Co.’s popular Stonegate project in north Irvine last December. They moved into the two-story, two-bedroom home in May.

“I felt like we were sort of at the bottom,” Tarhan said. “If the market was still going down, I would have rented another year.”

Tarhan and Williams started looking at existing homes last summer, hoping to get a house. But the new-home market seemed like a better deal, so they decided to compromise for now, and if Tarhan’s business does well, they’ll rent out this condo and buy a house down the road.

“We have extremely attractive interest rates, extremely attractive prices,” he said.

“Buyers have come to their own conclusions that it is smart to buy now,” Steve Thomas of ReportsOnHousing.com wrote in his latest report. “The only trouble with that is scores of shrewd buyers have figured it out all at the same time. Thus, there is tremendous competition.”

Thomas reported that Orange County’s “distressed inventory” of foreclosures and short sales now account for 18 percent of the market, down from 35 percent of the market in the spring of 2011.

“There is a palpable sense that we not only have reached bottom, but that we are starting to recover,” he wrote.

CASH IS KING

Redfin agent Paul Reid said that in some ways it’s reminiscent of the housing peak, but with a key difference: No longer do you see 100 percent, no-down-payment mortgages.

“Now,” said Reid, “cash is king.”

Homes in the $300,000 to $500,000 price range are most in demand.

“If you have a house in that price range and it’s standing, it’s going to get offers,” he said. “You have a lot of investors, and you have a lot of first-time buyers. It makes sense. … There’s a lot of cash that’s looking for a place to go.”

Andrew and Natalie Austin decided to quit being renters because they didn’t want to miss out on the low interest rates and the low prices, Andrew Austin said.

The Austins looked at 25 homes during their house hunt, and quickly abandoned hopes of scoring a bargain short sale.

“There’s definitely an influx of buyers,” Andrew Austin said. “And not many sellers.”

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