Consumers hoping to find affordable housing due to falling home prices had better hurry or plan on being patient. House bargains are getting harder to find for several reasons.
The current economic conditions would seem to be ideal for people looking for reasonably priced homes since all the news articles keep talking about falling house prices. Yet many consumers either hoping to buy up or wanting to get out of the rental market are having problems competing with big investors snatching up the bargains.
The number of foreclosures has been steadily growing for almost two years now and there are whole neighborhoods sitting empty in some city sections. But most people are not looking for a distressed property in an undesirable part of town. They want to buy in decent neighborhoods close to good schools and easy shopping and those homes are turning out to be difficult to buy. Investors with cash are buying the properties quickly because cash sales take less paperwork and certainly have less risk. When someone begins the loan process there is no certainty that the loan will actually close.
Making the situation worse for consumers trying to buy a house is the fact that government programs are starting to affect the supply of homes in the very areas where they hope to purchase. That is because the people qualifying for the loan modification program can afford their lower mortgage payments. Many of the early foreclosures were on homes that had subprime mortgages and had been sold to people who really should not have been able to qualify for the loan.
Some analysts are advising people looking for a house to buy to just be patient. There are still millions of consumers who are going to experience foreclosures and the houses will be on the market over the next three years. There are thousands who are now trying to get approved for permanent loan modifications who will not make it through the process. These consumers will eventually be foreclosed on.
Investors buying up bargain homes with cash are one of the main reasons people are having trouble getting in on the deals. Investors are buying the homes most likely to appreciate in good neighborhoods. These are the very homes that non-investors would like buy. Investors buy homes at foreclosure auctions for good margins. They often buy in quantity also.
It is interesting to note that some of the largest buyers are using state and federal money to buy community housing. The money is coming from the Neighborhood Stabilization Program which has been in effect since 2008. Foreclosed homes are purchased and repaired and then resold to low or moderate income consumers. But the government funded offers have more strings attached making it more difficult to close sales. For example, all offers must be at least 1 percent below the appraised value.
The pressure on the home sales market is resulting in two events. Homes are now selling for up to 90 percent of resale value, and this means falling home prices will probably bottom out soon. That is good for those who managed to avoid foreclosure through what has been called the worst recession known to modern man.
Tags: House, foreclosure, home, Personal finance, falling house prices, Real property law, Mortgage
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