A new development is catching home buyers off guard as the spring sales season gets under way: Bidding wars are back.
From California to Florida, many buyers are increasingly competing for the same house. Unlike the bidding wars that typified the go-go years and largely reflected surging sales, today’s are a result of supply shortages.
Peter Earl McCollough for The Wall Street Journal
Debbie and Bill Wetherell received multiple offers for their home.
“It’s a little surprising because we thought bidding wars were done with,” said Andy Aley, who is looking to buy his first home in Seattle’s Beacon Hill neighborhood. The 31-year-old attorney was outbid this year when he offered up to $23,000 above the $357,000 listing price and agreed to waive inspections and other closing conditions.
Competitive bidding in the current environment isn’t producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom. Still, the bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump.
An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday.
“We very much believe we’ve hit bottom,” said Ivy Zelman, chief executive of a research firm, who was among the first to warn of a downturn seven years ago. Earlier this week, she raised her home-price forecast for the year, calling for a 1% annual gain, up from a 1% decline.
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The Wall Street Journal’s quarterly survey found that the inventory of homes listed for sale declined sharply in all 28 markets tracked. Real-estate agents consider a market balanced when there is a six-month supply of homes for sale. At the height of the housing crisis, in 2008, there was an 11.1-months’ supply. In March, there was a 6.3-months’ supply.
Inventory levels in many markets were at the lowest level in years. At the current pace of sales, it would take just 1.5 months to sell all the homes listed in Sacramento, Calif., and 2.4 months to sell all the homes listed in Phoenix. San Francisco and Washington, D.C., each have 3.4 months of supply, while Miami has 4.1 months of supply.
Other markets have plenty of homes. Chicago, for example, has 9.4 months of supply, while New York’s Long Island has 16.1 months of supply. Even in those markets, the number of houses for sale is edging down.
Increased competition is frustrating buyers and their agents. “We’re writing a record number of offers, but we’re not seeing a record number of closings and that’s because it’s so competitive,” said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp. in Seattle with offices in 14 states.
Nearly 83% of offers that Redfin agents have made on behalf of clients in the San Francisco Bay area this year and 71% in Southern California have had competing bids. Redfin represented a buyer that made the winning bid on a Gaithersburg, Md., home earlier this month after agreeing to adopt the dog of the seller, who was relocating and looking to find a new home for “Buddy,” a white toy poodle.
Inventories are declining for a number of reasons. Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers.
In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation’s biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago.
Banks and other mortgage investors owned nearly 450,000 foreclosed properties at the end of March, and another two million mortgages were in some stage of foreclosure.
Inventories could rise, putting more pressure on prices, if the banks and other lenders step up their efforts to sell their properties. Real-estate agents say they aren’t concerned. “There’s an enormous appetite for foreclosures. Release the inventory. It will sell,” said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands.

The declining inventory of older homes is spurring sales of new homes. New home sales are up 16% so far this year, compared with a year ago, while inventories of new homes fell in March to their lowest level since record keeping began in 1963.
Meritage Homes Corp., a builder based in Scottsdale, Ariz., reported Thursday a 36% increase in orders for the quarter ending in March versus the previous-year period.
Even though bidding wars are pushing prices higher, many homes are still selling for prices far lower than a few years ago. Increased demand is “entirely affordability driven, which tells me there will be strong resistance to price increases” by buyers, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm.
Rents are rising at a time when mortgage rates have fallen to very low levels. The result is that the monthly mortgage payment on a median-priced home is lower than any time since the 1990s. Freddie Mac reported on Thursday that mortgage rates fell to 3.88% for the average 30-year fixed rate mortgage, near its lowest recorded level.
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Rates are “so low that we can afford a house that was out of our price range before,” said Aarthi Srinivasan, who is looking with her husband for a home around Palo Alto, Calif., one of the country’s hottest real-estate markets.
Ms. Srinivasan says she fears that prices are being bid up too quickly. She says she had her “aha moment” earlier this year while touring a 50-year-old house that needed extensive remodeling. The home, listed at $1.1 million, received nearly 10 offers and eventually went under contract for more than $1.3 million to a buyer who hadn’t even viewed the property.
“There are only so many buyers who are going to be in such a hurry, so we’re hoping it’ll top off soon,” she says. On Monday, they offered to pay more than the $1.2 million list price for a four-bedroom, bank-owned foreclosure. They haven’t found out if they made the top bid.
On the other side of those transactions are sellers like Debbie and Bill Wetherell, who had 17 offers in four days for their four-bedroom home in Danville, Calif. “I was floored. It was so fast, it was surreal,” says Ms. Wetherell. The home sold on Wednesday for $796,000, more than $50,000 above the asking price.
Still, the sale is for nearly $180,000 less than what they paid for the house in 2005. Ms. Wetherell’s husband has commuted to Reno, Nev., for five years and they have decided to relocate.
Housing markets face other headwinds. More than 11 million homeowners owe more than their home is worth. It is a big reason that the “trade-up” market has been stalled. These homeowners can’t sell their current homes, let alone come up with the down payment for their next home.
Mortgage-lending standards remain tough. Real-estate agents say an unusually high share of deals are falling apart because homes won’t appraise at the price that buyers have agreed to pay sellers.
Still, borrowers with stable jobs are looking to make deals. Kelly Pajela-Fu and her husband offered to pay the asking price of $600,000 for a four-bedroom home in Marblehead, Mass., within a day of the property hitting the market.
“We just knew this house would go quickly,” says Ms. Pajela-Fu, a 31-year-old doctor who had lost out on an earlier offer. Their strategy to avoid a bidding war paid off: The sellers accepted their offer before having an open house.

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For the month of March the single family market continues to be the strength of the market. While single family sales are down 3.1% from March 2011 to March 2012, sales are up almost 32% year to date, and the median sales price is up nearly $12,000 year to date. There was 21% increase in year over year sales in the condo market and as well as a 54% increase in month over month sales. However, even with a decrease in condo sales and in listings, there has still been a year over year decrease of 11% and a month over month decrease of 6.5% in the median sales price of condo’s in Pinellas County.

In the distressed market there have been ten straight months where short sales have continued to outpace foreclosure sales as banks are speeding up there short sale approval process. Of the 481 distressed property sales last month 58% were short sales and 42% were bank-owned sales. To give some perspective on how much the numbers have improved in March 2011 foreclosure accounted for 70% of the distressed market and short sales accounted for 30%.

Financing continues to be a problem as cash buyers have accounted for 60% to 65% of the market over the last year. Financing will be a key factor over the next year as the real estate market continues its recovery. Sellers will need to feel confident they can get financing to buy a new house before they will put their current house on the market.

According to David Bennett, President and CEO of the Pinellas Realtor Organization, “The pendulum is just starting to swing back towards a seller’s market. With the number of listings so low sales prices have been starting to increase, hopefully fewer homeowners are underwater and more of them will be able to sell.

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PHILADELPHIA – April 5, 2012 – After months in the works, HARP 2.0 is available to Fannie Mae and Freddie Mac borrowers who want to refinance but owe more on their mortgages than their houses now are worth.

HARP 2.0 – HARP stands for Home Affordable Refinance Program – is being billed as an improvement over the three-year-old version that just about everyone acknowledges didn’t help anyone.

The reason for that failure: The original program had limits on loan-to-value ratio, the amount of a mortgage as a percentage of the appraised value of a property. If the balance of a mortgage exceeded the appraised value – say, $300,000 versus $150,000 – the borrower wasn’t allowed to refinance.

Recognizing that none of the borrowers the program was intended to help would be able to qualify, the limits were dropped when the new version of HARP was heralded in October.

Does that mean all lenders have agreed to no limits?

“I have lenders that have limited the loan-to-values. Some have even differentiated between attached and detached homes,” said Philadelphia mortgage broker Fred Glick, who has launched a blog, http://harp2.com, to update consumers. “They still are limiting what they will do” with loan-to-value ratios of 150 percent and no more.

“All in all, it is a great way to get people’s rates down in spite of low values,” Glick said. “This will decrease the supply of homes for sale and increase values over the long run.”

As with all these programs, the months since HARP 2.0 was announced have been spent trying to get lenders on board – no easy task since Fannie and Freddie loans are pooled as mortgage-backed securities that are owned by many investors. All the investors need to agree before borrowers can apply to reduce monthly payments to today’s low fixed interest rates, which remained under 4 percent for many months but now are beginning to increase as bond yields rise in an apparently improving economy.

As of March 17, HARP 2.0 has been in place to help keep homeowners above water. About four million Fannie Mae and Freddie Mac borrowers nationwide owe more on their mortgages than their homes are worth.

The government has a website, http://www.makinghomeaffordable.gov, (link) that has details about HARP 2.0 and other information.

Underwater loans might also be eligible to refinance under provisions of the recent National Mortgage Settlement. That applies to loans neither owned by Freddie or Fannie nor insured by the Federal Housing Administration, which has its own streamlined refinancing under a program announced in January. Details of that settlement are being worked out, and eligible borrowers will be notified by the five participating lenders – Wells Fargo, Bank of America, JPMorgan Chase, Ally Financial, and Citibank – at some point.

To be eligible for HARP, homeowners must be current on their mortgage. That means paid in full up to date, with no late payments in the past six months and only one in the past 12. They also need to show that they can afford the new payments gained through refinancing without any trouble.

Borrowers must have closed on their current mortgage on or before May 31, 2009, and cannot have refinanced through HARP before. In addition, mortgages must fall under current “conforming-loan limits,” which vary by region.

One thing both Fannie and Freddie want to see is whether borrowers refinance to loans with terms shorter than 30 years. They call this “movement to a more stable product.”

Borrowers with an interest-only loan will be urged to refinance to a mortgage product that provides amortization of principal and accumulation of equity in the property.

Those who have an adjustable-rate mortgage will be encouraged to refinance to a fixed-rate loan that eliminates the potential for payment shock, or to an adjustable with an initial fixed period of five years or more and equal to or greater than the existing mortgage.

Homeowners with a 30-year fixed-rate mortgage will be advised to refinance to a 15-, 20- or 25-year fixed that offers, in Fannie Mae’s words, accelerated amortization of principal and equity building. But borrowers won’t be allowed to cash out equity under this refinancing “except for closing costs and certain allowances to cover items such as association fees, property tax bills, insurance costs and rounding adjustments.”

Plus, borrowers may not satisfy subordinate financing in the form of a home-equity line of credit or a closed-end second mortgage with the proceeds of the refinance mortgage.

Balloon mortgages and convertible adjustable-rate mortgages are eligible for HARP 2.0 if the conditional right to refinance the balloon or convert the ARM was exercised by the borrower and “redelivered” to Fannie Mae before June 1, 2009.

Resources

• To determine whether Fannie Mae or Freddie Mac owns your mortgage, check at http://fanniemae.com/loanlookup and http://freddiemac.com/mymortgage.

• To access Fannie Mae’s frequently asked questions file, go to http://goo.gl/pN54x.

• Many of the rules and regulations outlined in the latest information from Fannie and Freddie are far beyond the understanding of the typical homeowner, and, as the government warns, scam artists are already hovering above borrowers, waiting to pounce. For information about mortgage-assistance-relief scams, visit http://FTC.gov.

• Some underwater homeowners will qualify for assistance under the Mortgage Settlement. The Center for Responsible Lending has a downloadable consumer’s guide for that program at http://goo.gl/2FZKM.

Copyright © 2012 The Philadelphia Inquirer. Distributed by MCT Information Services.

With mortgage rates still low and the home prices so affordable, now is the time to purchase instead of rent……

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Click to view the Pinellas County real estate Monthly Indicators

The media sometimes obsesses over the negatives, but last year brought several important improvements in key metrics that should not be brushed aside, such as an improved inventory picture. Foreclosures also dominate news stories, and for good reason. People should occupy homes, not banks. Which means qualified buyers need reliable access to mortgage capital, and distressed properties may need further attention in 2012 to expedite transfer of ownership and tax-base recapture. As we delve into a new year, we’re seeing mostly positive signs. Let’s examine some of them.

New Listings were down 18.3 percent for detached homes and 29.9 percent for attached properties. Pending Sales increased 2.9 percent for single-family homes but decreased 11.3 percent for townhouse-condo properties.The Median Sales Price was up 9.8 percent to $118,000 for detached homes and 14.5 percent to $85,000 for attached properties. Months Supply of Inventory decreased 39.7 percent for single-family units and 36.7 percent for townhouse-condo units.

U.S. economic data has been encouraging. The unemployment rate flirted with a 3-year low and an initial reading on the fourth quarter of 2011 GDP was in-line with expectations. Mortgage rates posted yet another fresh new record low. At the risk of sounding redundant (at the risk of sounding redundant), the missing puzzle piece is still jobs. Improvements in the labor market will spur housing demand through new household formations, improve family financials and galvanize consumer confidence.

Click to view the Pinellas County real estate Monthly Indicators