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Westcoe Realtors, Riverside California…Given that we have been saying for some time that we have this massive demand for property in our area, interest rates are really affordable, and that many properties are having 10-20 offers submitted for the seller to pick from, some of our clients are wondering why home values are not rising faster?  Common sense would suggest that with so many more buyers than sellers, prices should be increasing…at a much more rapid pace than they are. 

So why aren’t they?  While we are beginning to see some price increases, why aren’t home prices rising faster?  Simple…the appraisal industry.

Ok…before we get a call from a bunch of angry appraisers, please note that today’s blog is not an incrimination or indictment of any singular appraiser.  But the simple reality is that the appraisal industry has undergone so many changes and “improvements” in response to the real estate market meltdown of the past 3-4 years that it is now almost impossible for home prices to rise in reaction to the intense buyer demand. 

The appraisal industry took far too much heat for the rise in prices in the early 2000’s.  Unlike the horror stories that the government wants to put out about “appraisers in the pocket of banks, burying unsuspecting buyers in overpriced homes”, the reality is that this type of activity represented a microscopic percentage of business.  Yes, there were bad appraisers…just like there were bad real estate agents, bad banks, bad loans, etc….but the appraisal industry was no more responsible for the rapid rise of home prices than anyone else.

However, the appraisal industry was an easy target for politicians bent on producing the latest sound bite for the national news.  As a result, the rush to “protect the buying public” from this latest evil was a number of new laws enacted that has had hurt the good people who were left behind…and that is sad. 

How?  Let me count the ways.

1.  Appraisers no longer work for the banks, but for a corporate intermediary.  This is to keep an “arm’s length” between the appraiser and the bank.  “No more bank pressuring the appraisers” shout the headlines.  Now, when an appraisal is needed, the bank calls the appraisal company, and this company sends out a random appraiser…an appraiser who may be from over 100 miles away!  No longer can the bank use a local appraiser familiar with the idiosyncrasies of the area.  Come on…do you really think an appraiser who generally appraises in San Clemente can really understand Riverside…or visa versa?

2.  Since appraisers can no longer contract with their local bank and must now contract with the appraisal company, they have had to “expand” their areas in order to survive.  This leads to situations like the one mentioned above…with an individual appraiser assessing value on a property way outside the areas in which the he or she usually works.  This makes for easy misunderstandings on value…especially in an area like Riverside, where for the most part, we are not sectioned into tract after tract like Orange County, and our properties are much older (which does not mean worth less).  There is far more “interpretation” required in Riverside than in most other areas.

3.  After the appraiser is done with the valuation, many properties are then subject to a “review appraisal”…which is a fancy way of saying that someone else will review the value given by the first appraiser (another “safety” precaution to keep the banks and appraisers apart from each other).  What the public doesn’t know is that this “all-knowing” review appraiser rarely sees the property or surrounding neighborhood, but is instead sitting at a computer somewhere (several counties or states away) simply looking at numbers on a screen.  They have no personal knowledge or understanding of the area of the property, just data and pictures on a screen.  And guess what?  If they decide in their remote wisdom that the property value is too high, they issue a new value that everyone is stuck with…end of story.  Yes, there is an appeal process, but good luck with that.  So, in the end, someone who has never seen your home is deciding whether you can sell it for the value all the local people seem to feel it is worth.

4.  If the local appraiser gets his appraisal price “slashed” too often by the review appraiser, then it looks bad for the local appraiser and he is not given as many appraisals to do by the company.  In essence, the local appraiser learns very quickly to stay ultra conservative with the original appraisal so as not to get his hand slapped by the review appraiser.  Even if the local appraiser knows that the original value reflects the true value of the area, they can be reluctant to go out on any type of limb for fear of getting slapped and losing business.  Hey, they have families to feed too.  So…they continue with the conservative approach.

5.  The cost of appraisals has gone up for the borrower…by as much as $200-300.  Why?  Because there is now a middle man (the appraisal company created between the appraiser and the bank), and this company wants to get paid too.  In the old system, all the money for the appraisal went to the appraiser…now it goes to the appraisal company, and the company pays the appraiser…and many times the appraiser makes less now than before.  That’s why they take appraisal assignments farther away from their base areas…to make more money since they now make less per appraisal.  And naturally, this price increase is passed on to the borrower who is ordering the appraisal to get his new loan on the home.

6.  Lastly, understand that the appraiser is the only person in your entire transaction who gets paid whether the transaction closes or not.  Everyone else (the Realtors, title, lender, termite work company, escrow, seller) only gets paid when the sale closes.  This creates a huge difference between who is vested in closing your sale and who isn’t.  We actually had one appraiser tell an agent that they were more afraid of their review appraiser than they were of the transaction falling out (this said after the valuation was brought in over $50,000 below what 20 buyers had wanted to pay for the home)…and beside, they had already been paid, so what the heck?  This is a unique example and is in no way indicative of most honest appraisers, but it can happen…just like bad situations could happen the old way too.

The net result of all this is a severely changed appraisal industry that currently seems more interested in holding prices down than letting a free market work it’s magic.  We cannot tell you how many times we have a transaction in which a low appraisal blows it all out of the water.  Think about it.  The buyer, seller, Realtors and bank all want the transaction to happen…but the appraiser holds all the keys…both the local appraiser and the review appraiser.

It may not seem fair or right, but it’s what our government has mandated we deal with to “protect” us all.  This is not a political rant, but merely a statement of the facts, and why these facts keep our housing market from freely reacting to elemental supply and demand forces.  Maybe things will lighten up in the future…but for now, we must all play by the appraisers rules, or they will take their ball and go home…and no one gets to play at all.

Westcoe Realtors, Riverside California…Of all the paperwork that gets shoved in your face when you purchase a home, one of the most important (and generally most boring) is the preliminary title report.  And yet, no document is more important than this one, for it will make sure you understand exactly what comes with the property after it is transferred from the old owner to you.  In essence, what warts will transfer with this sale?

In most cases, the title prelim lists every recorded document that goes with the property.  Generally, this includes any existing loans the seller has against the home, the current property tax status (with any back taxes owed the responsibility of the current seller), any easements that may affect the property (ie: does anyone have the right to cross your property for a specific reason), any legal judgements recorded against the current seller (with most of these needing to be taken care of from the sellers funds at close), etc.  These are the basic items found in a preliminary title report.  There can be more of course, but these are the basics.

However, there is a new item popping up on many bank owned properties, and unfortunately, in many cases, neither the bank nor either agent knows about it until well into the escrow period…and this new “recorded little nasty” is a code violation from the city in which the property is located.

Here is how it works.

From a political and visual standpoint, most cities are tired of the general deterioration of bank repos.  You know the story…dead yards, broken windows, stolen appliances etc.  Neighbors complain on deaf bank ears, cities get blown-off as well, and the only remedy for these angry residents and local politicians is code enforcement violations.

Generally in a code enforcement violation, once a property has been reported to the city/county code enforcement section, then the code enforcement officer can enter the property and cite away.  The citations can cover a multitude of issues…landscape violations, trash accrual, building violations, etc.  The end result is a list of items that must be fixed, and this list of items is noted and recorded against the property.

Unfortunately, the communication between the code compliance department and the bank that owns the property is poor…mostly due to the bank.  So while this new code violation is recorded against the property, no one knows about it until it shows up on a title prelim during the escrow period…many times only days before the close of escrow.  Now what?

Well, the first thing that has to happen is for either the buyer or seller to accept responsibility for the items listed.  It should be the sellers (the bank) responsibility, but that does not mean they will accept it.  The chain of command in dealing with the selling of a bank repo is cumbersome at best, and throwing a new (and potentially large) cost at the bank near the end of a transaction can wreak havoc.  Many times the bank will simply refuse to pay the costs of the repairs required.  Disregard the fact that if this escrow falls out they will now know about the code violations and will have to disclose same to the new buyer they will need to find…the reality is that banks generally don’t operate with any amount of common sense.

So…if the bank won’t accept the responsibility for fixing or paying for these code violations, that leaves the buyer.  At this point, is the purchase price is a good enough “deal” that fixing the violations still makes economic sense for the buyer, then full speed ahead.  However, in most cases, the buyer didn’t plan on this little surprise either, and they cannot (or will not) accept responsibility, and the sale falls out.

In the end, as in almost any escrow, when there are surprises, everything gets re-negotiated between the two parties, and hopefully, some common sense prevails…because unexpected surprises are no fun for anyone.  However, as we all know, common sense is not so common…so if you find yourself dealing with one of these code violation issues, we hope your end is a successful one.

In the meantime, be sure to read your title prelim very carefully so you know exactly what you are buying.

Westcoe Realtors, Riverside California…According to the latest November 1, 2009 MLS statistics for the Riverside area, available housing inventory remains at historically low levels, which has led to a drop in sales of 14% from the previous month of October.  As has been chronicled in this blog many times, the artificial withholding of foreclosed properties by banks from the resale market (see blog post of 10/16/2009) has finally taken a toll on the number of properties sold, as the reduced inventory has led to a drop in sales of over 14% from the previous month…and from the sales high point of March, 2009, the drop in the number of sales is almost 30%.

In raw numbers, there were 983 properties available for sale on October 1, 2009, and that number held statistically steady at 997  for November 1.  However, there were 483 properties sold in September, and that number dropped to 415 for the month of October, or 14%.  Since the demand for housing is still at an enormous pace, the reduction in the number of properties sold in October can only be attributed to the incredible reduction in  available housing inventory.  Since January 1, 2009, the amount of available properties for sale in the Riverside area has fallen from 2385 to its current level of 997…a reduction of 58%.

Closed escrows will always lag about 30-60 days behind the sales (average escrow period is approximately 45 days), and closings for September were also down as well…from 503 in August to 463 in September…a reduction of almost 8%.  Once the closing figures become available for October, it would be no surprise for them to be down as well.

The actual numbers for since June are as follows: (please note:  the following columns are equally spaced when written, but will come out crooked when posted…software “bug”…what can I say?)

Month                    Active Listings                    Sales                    Closings

June                              1332                                 519                        587

July                               1184                                 488                        520

August                          1100                                 457                        503

September                   1056                                 483                        463

October                         983                                   415                        Not Avail.

November                     997                                   Not Avail.             Not Avail.

For the next few months, should the inventory numbers remain stabilized, then all the other numbers will stabilize as well, once the time lags are accounted for.  What happens from there is any-one’s guess, as we remain committed to the fact that this market cannot begin a full and steady recovery until all the bank foreclosures are out of our system…and at the rate the banks are strategically doling them out, that could be many months away.  Only time will tell.  Until then, the real estate purchasing market place will simply have to contend with an artificially controlled market, multiple offers, overbidding, and all the other frustrations that come with purchasing a home in today’s unique real estate market. 

Westcoe Realtors, Riverside California…Right now in our Inland Empire area, there currently exists a huge (as in massive) gap between the incredible frenzied activity by buyers in our real estate market, and the appraisal industry…whose job it is to establish a value for the home so the new bank can make the proper sized loan for the buyer.  Appraisers took far too much heat for the real estate meltdown of the past few years, and as a result, between the new regulations enacted to “protect” the buyer, and their own fear of reprisal from “appraisal reviewers”, this market is not expanding at the rate is should.  Let us explain.

Most people assume that there are two parties to the sale of a home…the buyer and the seller.  However, unless the buyer is paying all cash for the home (a rarity in today’s times), there is actually a third player to the purchasing game, and that is the lender…and in the end, we must all play by the lenders rules, or they will take their ball (in this case, their money) and go home…and no one will get to play at all. 

The representative for the lender in this game is the appraiser, who evaluates every property the bank is asked to make a loan on for a buyer.  The appraisers job is to make sure the home is worth at least what the buyer is paying, therefore protecting the lender from making too big a loan on the property. 

Most of the time, in a normal real estate market (whatever that is!), since the buyer, seller, real estate agents, and the appraiser are all looking at the same data regarding value, establishing a price for the home everyone can agree upon is relatively easy.  Yes, there can be some discrepancies in establishing a value for some amenities (views, lot size, upgrades, etc.), but most of the time everybody gets on the same page….except for this market.

As you are aware from previous blog posts, right now our purchasing market is in a frenzy.  We have a very limited number of homes for sale relative to previous markets, and this is creating multiple offers on almost every property reasonably priced for sale, and over 65% of all homes that close escrow do so at a price that is equal to or greater than the original list price.  In essence, buyers are forced to “bid” for homes against other buyers, and as a result, the home generally sells to the highest bidder.  That is our market…fast, frenzied, and totally tilted towards the seller…which should lead to rising home prices.  Simple economics dictates that huge demand and limited supply leads to a rising price for that which is in demand…in this case, housing.

However, that is not happening yet.  Why?  Because of the third party in this game…the appraisers.

Now please, this is not a bashing of appraisers.  No angry comments from appraisers please.  We know you have a tough job.  However, until the appraisal industry as a whole becomes less concerned about the past, and more tuned to the current market, then our housing prices will remain relatively stable…because the problem is that we can sell the houses for higher prices, but the appraisers are afraid to let the market grow…because right now, appraisers are continually bringing in their appraisals at levels far below the actual sales price.  As a result, the bank will not lend the buyer the money they need to purchase the home, and the entire transaction blows up…only for the home to sell again at the same “high” price to another buyer who totally wants the home…and the process starts over again.

We actually had one appraiser last week tell one of our agents that they were more afraid of an appraisal review (the process where a supervisor, who has not seen the property, slashes the price for reasons unknown, since we never get a chance to discuss it with the reviewer) than they were having the transaction fall out of escrow.  You see, the slashing by the reviewer makes the appraiser look bad…the mere falling out of the sale simply looks like the appraiser is “protecting” the bank.  Therefore, this appraiser readily admitted that the low price they were giving the home (sold for $220,000, appraised at $180,000 because the appraiser used comparable sales from 4 miles away, not the 1/2 mile radius that we used to establish the $220,000) was because they were in fear of getting reviewed!  As a result, the buyer, the seller, and the bank all lost out on a sale that they all wanted…simply because of a low appraisal.  And ironically, the only person who gets what they want in this scenario is the appraiser, who gets paid up front by the buyer.  Everyone else loses, and the cycle begins anew.  We have sellers who are so frustrated because they have 20 people who want their home and are willing to pay a price for it, only to get slammed to the floor with a low appraisal.

The bottom line here is that fear rules the appraisal world these days.  The reviewers, who many times sit behind a desk in another city or state, only know that the Inland Empire area appears on many lists as being one of the top 10 areas in the country for foreclosures…so naturally, the prices must be falling…right?   No, they are not.  This is like slamming the barn door after the horse has escaped.  Yes, our prices have fallen a huge amount from their highs of a few years ago…but our market is besieged with buyers who now want to take advantage of these low prices and purchase a home.  Our market is ready to bounce back if only the appraisers would stop looking back, and start looking forward.  Maybe that is not the case in hard hit areas like Detroit, or other areas of the country…but right here, in Riverside and the Inland Empire, we are chomping at the bit.  Isn’t that what the government and all it’s stimulus packages want to happen? A resurgence of the housing market?

In the end, this situation will ultimately remedy itself over time…but the question remains…over what period of time.  We could be basically out of this mess and on our way to recover if not for the issues addressed here.  Only time will tell when we can begin the march forward.  Until then, we will continue to do what we can with what we’ve got…no matter how restricting it is for all our sellers.

Westcoe Realtors, Riverside California…The local Press Enterprise reported yesterday that on a nationwide level, housing starts were below projections…and this news seemed to startle some on Wall Street.  For those of us in this business who work in the sales trenches on a daily basis, our only response was surprise that anyone in the world could be surprised that housing starts are down.  Unless you have been dwelling on another planet unaffected by the economic issues of the past couple of years, reduced housing starts are a “no-brainer”…and here’s why.

Understand that builders are hampered by such a long time frame between when they purchase land and when they actually have a product to sell (permits, environmental reports, plans, city regulations, etc) that unless they have a really good crystal ball, they are very hesitant to get involved unless they know the market will be good for selling when they are ready.  Holding on to vacant land until the market recovers is how one becomes an “ex-builder” in a hurry, so they want to get in and get out as quickly as they can….anywhere from 12-24 months.  So, until anyone can tell a builder what the market will be like in 12-24 months, most will simply pass and wait…which means once the market actually does get better, the builders will be about a year behind.  Hence, building starts are down, and will remain down until this market becomes stronger…or at least predictable.

Next, there is also the issue of pricing.  Right now, in the Inland Empire area, prices have fallen so much that it would be almost impossible for a new home builder to sell his finished product and break even, much less make a profit.  In fact, one large builder said that land in our area has a negative value…meaning that even if you gave him the land for free, he could not build a home and make a reasonable profit (let’s say around 10%).  In essence, it would cost him more in building and labor costs than he could make by selling the home…and last time I checked, no builder is going to take all the risk to lose money.  In essence, unless the land owner is going to pay the builder to take the land off his hands, the builder will simply wait until housing prices rise enough to make a profit.

All this means is that housing starts will remain down until housing prices start to rise again…and who knows exactly when that will happen.  Almost all of the new homes being sold now were already in the process when the real estate market began its swoon, and therefore the builders had no choice but to forge ahead and finish what they had started.  They were damned if they stopped, and damned if they continued, but continuing was the better of two evils.  However, that does not mean they will volunteer for this path again…which implies that housing starts will continue to decline until there is hope that pricing will rise again…and even then, unless a builder has taken a huge gamble and tried to “predict and jump the market”, new homes will be 12-24 months behind the rising price market.

Take care, have a good weekend, and let us know if there is any issues you would like to see addressed in our blog.

Westcoe Realtors, Riverside California…According to the MLS closing statistics for September, 2009, properties that closed at or above the list price for the Riverside/Moreno Valley has reached a new all time high of 73%.  This is up from 67% in August, and represents the largest jump in the past 6 months.

This increase is the direct result of the vast upward spiral of multiple offers that are now received on most properties currently for sale.  Due to the extreme decrease in the number of properties now on the market (read previous posts on this blog), and the increased demand by first time home buyers anxious to purchase a home at today’s lower prices and interest rates, the number of multiple offers on the majority of properties available for sale has skyrocketed in the past few months. 

More buyers and fewer sellers means everybody is left to fight over the few available properties for sale.  This type of huge inequity between supply and demand means a bidding war for anyone desiring to purchase a home…and this bidding war results in eventual closings for the successful bidder in excess of the original list price.

In the price range of $350,000 and below, the ”overbids’ are actually higher, at 75%…which would make sense given that the majority of buyers are shopping in this price range.  In the higher price range of over $350,000, the statistics fall sharply to 58%, but even at that level, this current 58% is significantly higher than last month’s level of 50%.

Many buyers are concerned and frustrated by this frenzied overbidding process, and hoped that when banks release the thousands of repossessions they still have in some state of foreclosure, then supply will rise and the overbidding will not be as necessary.  However, if the banks continue to “piece-meal” their foreclosures and only release a limited number at a time, then there is no assurances that our current market will change any time in the near future…and the real estate buying public will see these overbidding statistics continue to hover at their current percentages.

Given the opinion of this writer that the banks are more concerned with their quarterly Wall Street profit pictures than they are in selling their massive supply of foreclosed properties (see previous blog post), then the manic, intense-pace purchasing real estate market we are now experiencing will be the norm for quite some time.  We would love to be wrong about this, but we fear we are not.  Only time will tell, but in the meantime, if you are considering purchasing a home in this pricing environment, strap on your helmet, get a good agent who can guide you through this maze, and take a heaping dose of anti-frustration medicine…because if you can get a home at today’s prices, it will be worth it.

Take care, and as always, let us know if there is any issue you would like to see addressed in this blog. 

Westcoe Realtors, Riverside California…According to the July MLS statistics compiled for the Riverside area, the resale housing market is continuing it’s dichotomy of two distinct selling markets.  For all properties that closed escrow in July with a sales price at $350,000 or below, 68% of those closings occurred at a price equal or greater than the original list price.   For homes above the $350,000 list price, the rate of “overbid closings” drops to 48%.  These percentages essentially mirror the statistics from the previous month, which were 68% and 45% respectively.  Overall, when combing all sales for July, the rate of overbid closings was 66%.

The reason for so many properties closing at or above the list price in the lower price range continues to be a reflection of the current supply and demand factors for the Riverside area.  Housing inventory is down substantially due to the California imposed foreclosure moratorium that ends in September, and the demand for entry level houses from first-time home buyers and investors is exceedingly high…and when demand far outpaces supply, then overbidding and “auction-type” frenzy is the only way a buyer can successfully purchase a home.  Multiple offers are still the norm, with most bank owned properties generating between 10-20 offers for the seller to choose from.

In the higher end market, the demand is not as great due to the higher interest rates and loan costs coupled with the larger down payment required to purchase a home in this range.  As a result, demand is not as high, and the overbidding is not as necessary.  Fewer buyers equals less buying frenzy.

In the price range below $350,000, the over bid rate has climbed from a low of 50% in April to the current rate of 68%.  This increase corresponds almost directly with the effects of a slow-down in the availability of foreclosures from both the Federal and State governments.  These programs were designed to give banks more time to work out loan modifications and assistance programs with troubled home owners, but instead has resulted in a minuscule amount of modifications and a massive log-jam of foreclosures simply stacked and packed waiting for the moratorium to expire. 

Many buyers, exasperated with the process of trying to purchase a home in these highly competitive conditions, have decided to wait until more inventory is available for sale.  This is fine if the banks release their foreclosures soon, but there is always the possibility that the banks will ration those releases as well, preferring to maintain the current inequity in the supply and demand chain.  After all, what seller would not like to have 10-20 offers from which to choose…and perhaps get the price bid higher?

Only time will tell what is the correct buying strategy, but for now, what we can say is that this real estate market continues to be red-hot below the $350,000 level…and if you are planning on purchasing  a home any time soon, bring buckets of patience as you travel the path towards your housing dream.  

Westcoe Realtors, Riverside California…Effective July 30, 2009, there are some changes in the way lenders must process new loans that could make closing an escrow take a few days longer.  This is generally not a big deal unless you are in an escrow time crunch, in which case you should be forewarned so you can hopefully prepare the other side of your transaction for the delay.  Given that many of today’s home purchases are bank repossessions, and these banks are almost always in a huge hurry (and often impose a $100 per day fine to the buyer if the buyer cannot close escrow on time), then it behooves a savvy buyer to be aware of these lender changes.

The time sensitive changes are as follows:

1.  When your lender gives you your disclosures on what your loan will cost to obtain (called a truth-in-lending statement), they now must wait 7 days before proceeding with the loan.  This is to give you time to re-think your desire to obtain the loan, and back-out if you want.

2.   This truth-in-lending statement must be given to the borrower again within 3 days of the closing, and if it is off by more than 1/8% from the original, then a new 7 day waiting period must be observed…again to give the buyer time to re-think their new loan conditions and either go or no-go.

Additional changes that will not necessarily add time to the process, but are changes none-the-less:

1.  All borrowers must receive their original truth-in-lending statement within 3 business days of making the loan application.

2 The lender is prohibited from collecting any fees other than a credit report fee until the 3 business days have passed for your review of the truth-in-lending.

3.  The lender must give the borrower a copy of the appraisal at least 3 business days prior to the close of escrow…although this requirement can be waived by the buyer if desired.

This new set of rules falls under the consumer-protection guidelines, and while the intent is to make sure that no borrower feels forced into a loan, the fear amongst real estate and lending professionals is that buyers who are fully aware of their loan details will be forced to wait anyway…and thereby possibly jeopardizing their ability to close escrow on their new home. 

Most reasonable home owners would understand the new regulations and simply comply with the mandated ”wait” period…but lenders who are selling foreclosed properties are not known for their patience with delays, so the prudent buyer will make sure the listing agent of any bank owned property is aware of these new regulations, and does not hold them against the borrower if there are any delays.

Good luck with your new loans, and as always, if there are any issues you would like to see addressed in this blog, please let us know. 

Westcoe Realtors, Riverside California…Normally Friday is Good News day, but with tomorrow being a holiday for many, we are fast forwarding the calender this week.  Speaking of holidays, it seems only appropriate that given the celebrations that will be taking place throughout our country this weekend, perhaps this is the time to give some thought and appreciation for some of the freedoms and rights we all take for granted…specifically the right to own real estate in our country.

It is unimaginable for any of us to envision an environment where our government forbids us, as citizens, to own property.  Owning a home is about as basic a right as we have in America.  Yes…we have financing issues, zoning issues, code issues, etc., to sometimes wade through, but in the end, no one just issues a proclamation that states we, the citizenry, simply cannot own a home. 

No one tells us at birth that our “class of citizenship” will keep us from ever owning property.  No one says that due to our religion, we are locked out of the home ownership process.  No one looks at our job, our income, our politics, or our geographical location and says that because of these things, we are not allowed to pursue the American Dream of home ownership.

We do not have to worry about going to bed at night, only to wake up with a new, military-overthrown government denouncing our property rights, and claiming that which we own now an asset of said new government.  Yes, we have eminent domain laws and issues, but they can be addressed in a court of law, not down the barrel of a gun.

In the end, while I can, at times, be very critical of some of the things our government does that adversely affects our housing industry, I am always thankful for both the right I have to voice my opinion, and the right I have to represent an industry that is there to help anyone purchase a home.  We live in a wonderful country, complete with its flaws and warts…yet hopefully we will all take the time at some point this weekend to contemplate the multitude of sacrifices that have made these freedoms a part of our daily life fabric.  Indeed, we are the fortunate few who are Americans.

Westcoe Realtors, Riverside California…We had someone email us with some questions regarding the 65% overbidding statistic discussed in yesterday’s blog post.  Specifically, they wanted to know the context of this percentage relative to previous months numbers, and if this is any different, then why so?

Thanks for your questions….they are both very good.

 First, the percentages for 2009 are as follows:  Jan…60%, Feb…59%, Mar…59%, Apr…50%, and May’s of 65%.  If you want to go back further, the last 3 months of 2008 averaged 61%.  SO…yes, there was a spike in May, and my 30+ years of experience tells me that June will be just as high as May, and maybe even higher.  Why?  Well, that leads to the second part of today’s question…”Why the spike in May?”

Easy…more buyers fighting over fewer pieces of cheese.  This is the simple economics issue I referred to yesterday.  When you have an overwhelming demand for properties (as our Inland Empire area does), and you artificially limit the supply of foreclosure homes for sale (as our Federal and State governments have), then the result is too many buyers fighting for the same properties, and that leads to bidding, bidding, and more bidding as the home ultimately goes to the highest bidder.  Now, whether the home can appraise for that high value is another matter, but even if it can’t, it probably will appraise for a value over the original list price…and that leads to our 65% overbid closing stats for May.

So, why is the government limiting the number of repos on the market?  Far be it for me to even try to imagine what goes through the head of a Federal or State legislator, but the bottom line is that while there are thousands and thousands of foreclosures that need to flow through our system for things to get any better, both levels of government have done all they can to try to slow this process.  The list is long, but as an example, we are currently 8 days into a  90 day California mandated foreclosure moratorium that is only delaying the inevitable sale of these properties.  It makes no sense to us, but no one asks our opinion on this stuff…we are simply left to clean up the mess.  What can we say?

So…thank you for your question about the 65% overbidding number, and let us know if there is any other questions we can answer for you.