National home sales were up 10% this September according to the National Association of Realtors. Some factors contributing to this growth are low mortgage rates and high affordability, home prices are averaging 22% less of where they were five years ago. Affordability has been influenced by the weakness in home buying activity. September’s home sales are still down 19.1 % from the same period last year and demand for homes has decreased since the homebuyer tax credit expired last April.
However, California hasn’t experienced this national upswing in sales and the downward trend continues to be a problem. Buyers already have concerns about foreclosure reversals and lenders have already limited the number investors due to putting limits on how many properties they can purchase. Wouldn’t it be better to have a strong buyer with 25% down than a high risk FHA buyer at 3.5% down? This perpetuates the problem only causing more defaults. To make matters worse, many lenders are increasing their demands for short sale purchase prices, often demanding prices tens of thousands of dollars over the prevailing local assessed value. This is not only a disturbing trend to short sale homeowners and homebuyers but to the local communities affected. When lenders demand unreasonable prices in a weak market they discourage what few buyers there are, allowing properties, often vacant, to sit for months or even years. It is these types of practices that encourage the increase of city violations, HOA penalty fees, theft, vandalism and vagrant squatters, resulting in a further decrease in local property values.
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