Bidding Wars Seen on Low Priced Homes

22 07 2009

Bidding wars are returning to Florida’s housing market, as investors and first-time buyers compete for homes and condominiums listed at $200,000 or less.

The race for properties is reminiscent of the boom years from 2000 to 2005, when multiple offers on all types of dwellings helped push prices to record highs.

Back then, a dearth of properties for sale had buyers rushing to scoop up anything they could find, for fear that prices would keep rising. Now, frustrated with a bloated inventory of foreclosed homes in disrepair, buyers go to great lengths when they spot a house or condo in pristine condition.

Real estate agents in various parts of Florida including Jacksonville say the heated competition has been building in recent months, a result of low mortgage rates and the $8,000 tax credit for first-time buyers that expires Nov. 30.

Steady sales increases during the past year gradually have worked off the inventory of available homes. Real estate agents are convinced that the overall market has hit bottom or is close to one.

Housing market researchers have a different take.

Because of mounting job losses and the lingering recession, the bidding wars are mostly confined to homes offered at deeply discounted prices. Also, housing experts say, the market needs more than investors and first-time buyers taking the plunge for a rebound to occur.

Analysts don’t expect across-the-board price increases soon and predict that prices in Broward and Palm Beach counties will keep falling, albeit at a slower rate, through this year and into 2010.

Rising unemployment is sure to lead to more foreclosures and property sales later this year, which almost certainly will lower prices.

Some observers suspect that lenders are holding back the supply of foreclosed homes, promoting bidding wars to increase prices now before the flood of new listings further depresses prices.

Banks dispute that notion. They say they’re overwhelmed with foreclosures and try to market them for sale as quickly as possible.

“The longer we hold them, the more money it costs us,” said Nancy Norris, a spokeswoman for banking giant Chase.

The bidding wars in Florida are giving sellers more leverage after three years of buyers calling the shots.

In some cases, first-time buyers are losing homes because sellers prefer dealing with cash investors who don’t have to fiddle with financing.

Meanwhile, some real estate agents are creating “drama pricing” – listing properties for far less than the market value to attract bidders and drive up the eventual selling price.

Drama pricing typically happens with short sales. Those homes aren’t as much in demand because buyers know that it can take months for the deals to close. In a short sale, a lender accepts less than what’s owed on the mortgage and forgives the remaining debt.

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