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Monday, May 14, 2012

Housing: The Return of Multiple Offers

by Calculated Risk on 5/14/2012 04:34:00 PM

I've mentioned this before, but here are a couple more excerpts from articles ...

From Susan Straight at the WaPo: How to buy a house in D.C.’s sellers’ market

If you’ve dipped a toe into the Washington-area real estate market these days, you know it’s returned to an era of multiple offers, escalation clauses and competitive bidding. According to RealEstate Business Intelligence, the active inventory of homes in March was down more than 25 percent from March 2011.
Sellers are in heaven; buyers are feeling the stress. These days you can go to any open house of a home in good condition in a desirable neighborhood, and you’ll find you’re one of a steady stream of potential buyers.
From the Jon Lansner at the O.C. Register: O.C. homes draw multiple-offer ‘avalanche’ (an excerpt from Steve Thomas' report)
Below $500,000 range is NUTS. Homes priced at or near their market value are generating an avalanche of multiple offers. A home in this range is placed on the market and, within moments, cars filled with buyers are touring the home. ...

Upon writing an offer, buyers quickly find that they are one of many, sometimes over ten, offers on the home. Suddenly ... In the end, the seller factors the highest price with the largest down payment. I know, you are thinking, “What about the appraisal?” In many instances, shrewd sellers and Realtors are leveraging the competition to drop the appraisal contingency and require the buyer to make up the difference between the appraisal price and the purchase price, IF there is an appraisal problem. ...

Supply has dropped to levels not seen since June 2005. ... The expected market time for all of Orange County is 1.5 months, or six weeks.
The local economies in these two areas are probably better than most of the country, and anything priced right is selling pretty quickly. The key reason for the multiple offers is the sharp decline in inventory.

Although this might remind some people of 2005, I think the dynamics are very different. This is only happening in a few parts of the country, the buyers are usually making substantial down payments, and I suspect any clear increase in prices would be met with more supply ("sellers waiting for a better market").