If you've tried to buy a property lately you know it hasn't been easy. Multiple offers, offers above list price, cash offers and prices that are so high you know they won’t appraise-are all happening with more and more regularity today. It closely resembles the boom of the early 2000's and it's the same type of buyers doing it again with mostly cash.
It seems as though this group of buyers doesn't want to miss out this time around so they are jumping in and artificially inflating an already delicate market. This could spell disaster down the road. Eventually the cash will run out and we will be right back to where we were at a few months ago, but worse.
Sooner or later financing will have to play a role in market stabilization. If agents and banks don't begin entertaining financed offers, we are going to see homes selling for pennies on the dollar.
Eventually the foreclosure with no kitchen will have to be dealt with by the municipalities. What happens when you pay cash, as-is for one of these homes and the municipality requires all work be permitted, inspected and signed off on? Now your weekend project just turned into a money pit and you don't have the cash to cover the added expense (probably 4 times the cost)...ouch.
These 'investors' are over paying and once again inflating the market and once again they will eventually get burned.
To make matters worse homeowners with properties that have plenty of equity are trying to take advantage of the buyer frenzy and listing their homes as “non-short sales” at exuberant prices. These homes will never appraise and their direct competition-distressed properties-are burying them. These homeowners are in la-la land and refuse to accept their homes market value. Eventually they will be upside down as well. The agents who list these homes should have their licenses revoked. They are doing a disservice to the homeowner, prospective buyer and the industry as a whole, all so they can brag about their listing inventory but we all know listings don’t make you any money until they close.
Look for the market to take another dip and slide further until true stabilization sometime in 2012. Don’t believe me? Wait until the effects of the recession take root and those foreclosures begin to hit the market the beginning of next year and we may be in this thing beyond 2013. It’s still a great time to buy, just don’t overpay and be prepared for a long frustrating search.