Well, if you have been following me on Twitter you know I have been working a lot of foreclosures recently. The problem is that the vast majority of foreclosures have not arrived on the market yet. As a result there is actually very little supply in the market, but lots of demand. (I am specifically talking about the $300k to $700k price range in Santa Clara County in Northern California.) The result has been lots of bidding and no real deals for a first time home buyer. This has been very frustrating to my clients who look at the national news and hear about all these foreclosures out there.
This is what my crystal ball is telling me: Late September will be the beginning of the flood of foreclosures. This will continue to build through at least the first quarter of next year. November and December will be great for buyers who don’t obligate themselves to the holidays and make themselves available to the process--previewing, writing the contract with their agent, being available for the inspections, etc. The perfect scenario would be find the house in November and close by December 1 so that you can take advantage of the $8k tax credit. But if you miss the deadline all is not so bad. You could pay more than $8k in the currently overpriced local foreclosure market or you can save $20k to $50K later when the market softens.
My prediction is based on the effect of the "California Foreclosure Prevention Act" and recently released economic data. As you may have read in my previous blogs, California passed the “California Foreclosure Prevention Act," which basically delayed foreclosures from coming on the market. This moratorium will end on September 15th and should produce a spike in supply at that time. Remember... price is a function of supply and demand. A higher supply with a unchanged demand factor should lower price.
According to RealtyTrac’s Midyear 2009 U.S. Foreclosure Market Report, more than 1.9
million foreclosure filings were reported on more than 1.5 million U.S. properties in the first half of 2009-a 9% increase from the previous six months. Lurking in the shadows? A large wave of bank-owned properties yet to hit the market. Add this additional supply on top of the supply pent up from the California Foreclosure Prevention Act and you can see that a storm is brewing favoring buyers.
If you are a buyer or investor and looking for more information, please feel free to email me at brent@brentsellshomes.com
If you would like a list of foreclosed properties in Santa Clara County, click here.
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