There has been a train of thought of late that the banks are delaying the real estate recovery by not putting all foreclosed homes on the market as soon as the lender takes possession.
Setting aside for the debate over whether this hoarding’s actually taking place (Heather Barr recently quoted the Cromford Report in one such effort), I’m having a bit of trouble understanding how flooding the Phoenix real estate market with homes all at once. The oft-used analogy of tearing off a Band-Aid just doesn’t apply.
By limiting supply – to my opinion, limiting supply a bit too much – and creating demand from buyers who perceive the market as turning, the lenders are levelling the declines we have seen for the past couple of years.
It only stands to reason, and to basic economic principles, that continuing to limit supply only will serve to increase price assuming demand holds steady (and assuming there are not artificial dampeners placed on the market, such as the HVCC appraisal silliness.)
The notion that banks electing not to sell homes immediately is unfair, unethical or just plain mean is so much elementary-school bunk. Placing a deadline on turning the homes around is much like saying that everyone in DC Ranch who has been mulling whether to place their home on the market is required by law to do so by August 1.
What exactly is the point?
(Rhetorical: the point is real estate agents and other pundits continue to look at the market only from the position of buyers or sellers and not as the market as a whole.)
All of this assumes that banks will see the trends and the pricing upticks and stop listing homes well below market value in an effort to spur bidding that may or may not ever reach the actual market value.
Case in point … a home in Surprise which comps out at approximately $160,000 was placed on the market at $117,000. Within three days there were 30 offers submitted.
(Note to those who still believe you can lowball a bank-owned home … 30 may be a bit on the high side but the multiple offers are a fact of life.)
What would have happened had the bank priced the home at $130,000? Maybe there only would have been 20 offers instead of 30. Isn’t that still enough?
Or what if the bank dared to price the home at $160,000? Do you really believe that all of the demand would have disappeared? Hardly.
Lenders can finally hold with the recent comps when pricing properties if they choose to do so. Such a strategy only can benefit those of us who have watched the value of our homes tumble as banks slammed the market as hard as possible.
If you want to find fault with the lenders, then find fault in their current pricing methods. But to claim the recovery is being delayed because the market hasn’t been flooded all over again … some rudimentary economic theory would be worth the read.
[tags]Phoenix real estate[/tags]