In the boom days of 2002-2006, consumers benefitted because even people who should never have been able to get a home were able to do so. In today's market, serious buyers find themselves having to make multiple offers and may give up in frustration in their attempt to get a home in many parts of San Diego County. If there was a "buyer's market" it sure didn't last very long.

As most buyer's agents know, the bank selling a home in foreclosure will often take a cash offer that is less than an offer which contains a financing contingency. That may make sense, and may seem harmless enough, but let's look at it in more detail.

By taking a cash offer, you can see how a lot of the peripheral businesses involved in real estate are also hurt:

1. There is no new loan, so no bank or loan officer is able to generate new business
2. There is no title insurance policy on the buyer's side, so one of the key support businesses in the housing industry is not generating as much revenue
3. An appraisal is no longer necessary, so appraisers are not getting new business
4. No termite clearance is required, so the termite companies have less work
5. By taking a lower price, the home is not sold at true market value and will continue to influence future valuations in the neighborhood.

This last point can be really significant. For example, a bank owned home last month in Encinitas was listed at $500,000 and the bank sold it for $480,000 to a cash buyer even though there were two offers at $560,000. Why? Because it was a cash offer, and it came in a day or two before the others and they had already made up their mind. I'm convinced in many cases if a bank would keep a home on the market for two weeks before accepting an offer, we could see at least a 3% increase in the average sales price.

Instead, by continuing to price new listings significantly below market price, and not taking the highest offers on the table, the banks are forcing market prices down more than it should from supply and demand alone. Which really is just hurting themselves because the majority of sales involve a bank either through an REO or a short sale.

Homes in good neighborhoods, priced right and in decent condition are getting multiple offers. Why is that?

The number of homes being sold is definitely higher year over year, and from February to about June is the most activity each year on a seasonal basis, so that accounts for some of the competition among buyers right now. I saw the same thing last year at this time...properties with 10, 15, or 20 offers.   The statistics will still show that home prices are decreasing. What is misleading is they are decreasing because the volume of sales are happening now in the lower price ranges. The homes above $600,000 or 700,000 are pretty stagnant because of high interest rates on jumbo loans.  

Another factor is the way the banks are handling the short sales and foreclosures...they don't take the highest offer often. They either take the first offer or the cash offer. If they continue to take less than close to maximum market price then they can easily force prices to continue downward longer than they really should based on market fundamentals...supply and demand. Right now, the decent neighborhoods in Oceanside in the $250,000-400,000 price range have low inventory and a lot of buyers waiting so prices should go up.  

So to be a successful buyer in this market you need to:  

1. Be patient when you do make an offer
2. Be quick to make an offer
3. Take your best shot right from the start
4. Be prepared to make 6-10 offers.  

It doesn't really seem like a buyers market when we have to adhere to those guidelines. Can someone tell the newspapers please!!??

Does anyone know from dealing with Countrywide in short sales(where they are the first lien holder on the seller's home) if there is a maximum closing cost credit they will allow to an FHA buyer? I have heard 3%, but I just want to confirm.

An appraiser who was doing a valuation in Oceanside's Rancho Del Oro neighborhood was kind enough to email me a graph she put together of the last 6 months of sales activity Thanks to Lisa Forbes for showing graphically the popularity of this tract in Oceanside. With good schools, convenient location, affordable homes, and a cared-for community, it is popular with first time home buyers, military personnel serving Camp Pendleton, investors, Orange County commuters, and more.

Harbor Pointe in Carlsbad near Poinsettia and I5 is a gated community in a good location. And the real estate downturn seems to have avoided it so far. Very few homes have sold over the past couple years, and the prices have pretty much been holding steady. I guess it comes from a combination of location, price point, low HOA dues, and a well maintained gated community that never had a slew of buyers over-extending themselves. I'd say it's like buying a blue chip stock, except we all know what the stock market has done in the past year...

For all the published doom and gloom, Rancho Del Oro in Oceanside, CA continues to be a popular area for buyers due to it's good schools in either the Oceanside or Vista school districts, a convenient location, and an association doing it's job maintaining the grounds to preserve the look of the neighborhoods.

As of 1/27/09, there are only 28 Active listings of detached homes in the MLS and 20 homes are in escrow. I consider a normal inventory of Active listings to be about 40-50. Low inventory, low interest rates, and increasing number of sales should help prices stabilize. However, the banks controlling the short sales and foreclosure listings continue to price lower than prior sales. I don't think they really need to, but until they stop, they are driving the prices lower and hurting themselves and all the non-distressed sellers or existing owners in the process. 

I have been pleasantly surprised recently by seeing some banks take the time to not only put carpet and paint in homes that need it, but also to replace appliances and fixtures that have been ripped out by the prior owners before being foreclosed.

It certainly creates a better impression for the buyers, helps those buyers get into homes who may not have the reserves after closing to spend $10,000 or so to do these repairs, permits VA and FHA buyers to consider these homes as the home may not otherwise qualify, and is one less cost that needs to be estimated in the buyer's overall picture for getting the house move-in ready.

I guess with all the illogical things I see the banks doing, this one actually makes sense. Hurrah!

Recently, I went into a few Oceanside homes with obvious mold conditions: garage wall covered in mold due to a water heater leak; mold under the kitchen sink due to a dishwasher line leak; mold in the fridge due to the electricity being turned off and the fridge not emptied nor cleaned...etc

A few times I have feared for my own health, but more than that, if I am entering a property with a buyer, I certainly don't want to compromise their health.

I think listing agents, out of at least courtesy but also to reduce their liability somewhat, should be required to add comments in the confidential (agent-only) remarks section when possible health or safety issues are present.

So in addition to mold, it would be nice to know about dogs that bite, rodent or insect infestation, questionable structural integrity, exposed live wires or nails, etc.

Do you think this is a good idea, and what would you like to see added to the list?

For those wondering which direction the market is headed, here is an area in Carlsbad that seems to be headed in the right direction. Part of the reason is this area does not contain many newer homes, so either local builders are not slashing prices and bringing down the values, or recent buyers who bought too much house are not foreclosing or doing short sales as much as many other parts of San Diego.

I used the Sandicor MLS looking at 6 month intervals from 2003-2008. Detached homes with an average size of 1900 square feet and built before 2000. Olde Carlsbad is an area east of I5, west of El Camino Real, south of Hwy 78, north of Cannon Rd.

If you find this information useful, and would like to see it for other neighborhoods, let me know and I'd be happy to generate the data.