Additional Input on Yesterday’s Post Regarding MLS Stats

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.