Want to buy a house? Take a number
Remember when real estate was so hot there were lotteries, bidding wars and desperate people making offers sight unseen? In some markets, they're back.
Perhaps you, like me, thought we'd never again see the kind of madcap competition to buy homes that was common in the housing boom. I'm thinking of lotteries, not to win a home but just a chance to buy one. I'm remembering bidding wars and home shoppers so desperate to buy that they'd camp overnight outside new subdivisions to be first in the door the next day.
Never say never.
In some parts of the country, this kind of red-hot competition for homes, especially new homes, is back. Boom-era responses like camping in line overnight, homebuilder lotteries and buying homes sight unseen are making a reappearance.
That's how intensely demand is rising in some cities. If a picture speaks a thousand words, these nine spellbinding maps of U.S. home-price appreciation (a map for each year from 2005 through to today) tell the story of housing in the last crazy decade: from boom to bust to a second dizzying acceleration.
So far, this the new run-up in prices is confined to a handful of cities and regions, particularly coastal California markets, Phoenix and Tucson, Las Vegas, Denver, Boston, Seattle, Portland, the Washington, D.C. metro and several Florida markets.
Authors of the CoreLogic Case-Shiller Home Price Index say prices rose nationally 7.3% in 2012 and could jump an additional 3% this year.
In Silicon Valley, few jaws drop anymore when a nice-but-nothing-special 986-square foot Palo Alto cottage like this one, listed at $1.25 million, inspires 20 offers and sells for $1.73 million.
Nearby, in the only slightly less-expensive town of Sunnyvale, 50 or so eager, prequalified home shoppers began camping out overnight for a chance to buy newly completed units in a 228-unit condo development.
To inject more fairness -- and less discomfort-- into the buying process, builder O'Brien Homes revived the boom-era practice of holding lotteries that gave winners the chance to buy. The two-, three- and four-bedroom condos initially sold for $420,000 to $620,000. But by the time the development sold out in April, demand had pushed prices up 32%, to $555,000 to $815,000, CNN Money reports.
The participants were already pre-qualified for a mortgage and had their down payment in place. After being assigned a number, they crossed their fingers and waited for each bingo ball to be plucked from the tumbler.
Backup winners were also drawn, in case the first winners backed out.
Even with the price hikes, buyers kept returning. O'Brien started issuing returnees an extra bingo ball. If they lost for four straight months, they would get five chances the next time.
In other Bay Area towns, Livermore and San Ramon, Calif., other builders are also resorting to lotteries to manage competition for their product. Such buyer demand is not confined to the Bay Area. Homebuyer lotteries also are cropping up in northern Virginia and in parts of Florida.
Tales of homebuying exuberance
Does these buyer frenzies add up to a new era of irrational real estate exuberance? Some say yes, others no. But, bubble or not, demand can get pretty intense as investors and buyers fall over each other to snatch up the few homes available for sale.
In San Diego, "major builders are requiring prospective clients to sign up on lists for a chance to buy a home," writes The San Diego Union-Tribune.
In the Portland suburb of Beaverton, Ore., this sweet but ordinary two-story, three-bedroom, three-bath home was shown 48 times in 48 hours.
"Another listing in the same area got four offers in its first four hours on the market," Redfin told Forbes. The 1,681-square-foot 12-year-old house sold March 28 for $295,000. It was listed Feb. 22 for $298,900, according to Redfin. The last time it was on the market, it was listed for $292,500 in June 2011 and sold in August for $10,000 less.
Forbes recently compiled examples of extreme buyer behavior gleaned from Redfin agents around the country. Among the wildest:
Month-to-month markups: Agent Brad Le got a $520,000 offer on a San Jose condo even though a unit with an identical floor-plan sold for $470,000 the week before. Nearly all of the nine offers on the Redfin listing waived inspection and financing contingencies.
Instant flips: A buyer for this Bowie, Maryland home beat out 15 other offers by paying $22,000 above the asking price, only to get an email from investors the next day asking if the buyer would like to sell at a profit the property he'd just got under contract.
More from MSN Money:
- Why micro apartments are a huge deal
- The craziest refi requirements ever
- Once-homeless family wins dream home
and we start housing bubble again. and put us back into great recession or great depression again....
half of the houes in US will be underwater again.
DOW crash back to 6000
and tax payer will bail out bank again....
i guess we never learn....
The big difference this time is that buyers have to have skin in the game. None of this "stated income" jazz or 0% down. Buyers see the prices rise in the areas they are looking in and realize that it is going higher as they sit back and watch. Panic starts to set in and they dive in paying more than the asking price because, they figure that if they wait any longer, it'll only go up even higher.
Flippers then see the waiting lists and bidding wars and realize that if they can get a property, they would be able to sell it for a profit even before the ink dries on the purchase contract.
Greed sets in and then everyone starts thinking about those stories of instant profits and "free money." The lemmings start running again.
If you flip a house in a hot housing market (often after not doing anything at all to the home), and you make a profit of $20,000 or $30,000, you're called a savvy businessman.
However, if you flip a concert or sports event ticket, in many states you're called a scalper and arrested.
Why can only the big guys, who can afford an outlay of thousands of dollars for a home, make a profit? I thought capitalism was for everyone.
Write to your lawmakers and ask them why ticket flippers can't make a profit, albeit a smaller one, too.
Looks like 2006 all over again.
Remember the old saying buy when everyone one hates them and sell when, you know..................
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