We are seeing a lot of movement in the market right now with buyers taking advantage of historic low interest rates and a large inventory of property to make this one of the strongest buyer markets in recent history.

Sounds great doesn’t it!  But there is a deeper story not being told.  If you are looking for a good quality property with little work at a great price you just maybe @#!!%% out of luck.

The BGA Team got together early in the week to talk about what we are seeing.  While prices are down at around 2004 or 2005 prices there is a worrisome trend happening.

If a property comes on the market, is priced right and is in decent to good condition, we are seeing multiple contracts, bidding wars and properties moving in just a few hours.  If the property needs work or is overpriced it will sit and potentially will sell far below what it would have potentially in a market at equilibrium.

Banks, God love ‘em, have caught a clue.  In the foreclosure market, their pricing strategies have taken into account the condition and location of the property.  In some cases they are pricing aggressively to get a bidding war going and escalating the price much higher than it would have sold for just a couple of months ago.

Will interest rates remain at these lows?  The past few weeks, we have seen them inching higher than the historic 4.9% we reached.  Right now mortgage rates have been range bound for the past few weeks (between 5 percent and 5.5 percent — assuming 1 point). With refinance volume booming, the Fed should soon start yielding the results of lowering rates to historic levels. Expect a temporary pause in price declines and a reduction in the excess inventory in part stimulated through a reduction in delinquencies.

In Bankrate.com’s weekly polling of economists, a little under one-third of the panelists believe mortgage rates will rise over the next 35 to 45 days. The same percentage think rates will fall. A little more than one-third believe rates will remain relatively unchanged (plus or minus 2 basis points). (These are) still historic lows, and remember, a 1 percent difference in rate for $150K loan amount only equates to a $100 difference in payment. If it makes economical sense, lock and close now.

Well, honestly, who knows.  But I can offer some insight into four new trends that might give us all an indication of where things are headed. 
 
Multiple offers on bank owned properties and some traditional sales:
We are now seeing multiple offers on many bank owned properties and even some very well priced traditional sales.  This could be an indication that the buyer feels the floor has been established.  In a correcting market it is often the bank owned properties that set the new floor for the market. Buyers bidding up prices on some of these amazing deals leads me to believe that the value has returned to the marketplace and the prices can’t go much lower.  The affordability matrix is back in line in most places (income vs price of housing) which is a solid indication of coming stability.
 
Incredibly low interests rates:
No matter how you slice it, 5% is an amazing rate - especially on a 30 year fixed loan.  Current homeowners know this, thus the huge rush to refinance; yet, the buyers in the market have yet to understand how incredibly powerful a 5% rate is versus even 6%.  We are seeing some indications that it has become cheaper to buy than rent and that balance needs to tip before the buyers flood back in.
 
Fewer unrealistic sellers:
Indeed there are a lot of houses on the market, yet most of them are way over priced with sellers who don’t understand the market, or hope it to be different than it is.  However, we are seeing fewer sellers trying to “see what they can get” than last year at this time.  More realistic pricing will mean more transactions in the marketplace.  Prices are generally back to late ‘04 to early ‘05 pricing.
 
Real Estate recovery first:
It seems most people in the Obama administration understand that the path to economic recovery begins with a solid real estate market.  That premise of understanding should lead to some important government programs to incentivize buyers into the market place.  We have to be careful, however, not to create a false environment that is not sustainable.  4% interest rates, for example, may be nice, yet are unlikely sustainable - which would be damaging to the market when the rates return to “normal”.