The slow release of foreclosed homes onto the market may be intended to “stabilize” prices, but it is not having that effect.   What is happening is that there is incredible competition for each home that comes on the market.  Buyers have already purchased the large inventory that had been sitting on the market so now with a slow trickle of new listings each home that comes on the market is getting over a dozen offers.  There are many families trying to get in to these homes, but the winning bids are consistently the investor “cash” offers.   Sale price is determined by market (recent solds) as well as the relative financial position of each offer.  A low down payment offer will need to come in at a higher price than an offer with a conventional loan to counter the attractiveness of a buyer with perceived better economic ability to close the deal.   Conversely, a cash buyer can offer substantially less than a buyer with a loan, the cash buyer has the attractiveness of a certain close.   What I have been seeing in the field is that a vast majority of the accepted offers are now cash deals.   The sale price is therefore on the lower end.  The effect is that the market is that we have haphazard comparable sales prices.   Competition among buyers who require a loan to finance the purchase push prices higher.   A high influx of cash buyers pushes prices lower.  

If we increase the supply of homes coming on the market we will be more likely to see stabilization of home prices.   Competition among buyers who finance their purchase will be more realistic.   With more homes on the market the relative percentage of homes purchased by cash buyers at a discount off of true market will be less and the impact more easily absorbed. 

The large inventory of foreclosed homes being held by the banks needs to be put on the market.  Not all at once, but at a much faster rate.  The current rate is NOT having the desired effect.

Robin Stelle