If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

The ever elusive bubble that the media discusses has pretty much yet to evolve. I did some research and found the first mention of over-inflated properties back in 2001 when RealtyTimes.com columnist Broderick Perkins interviewed several real estate bubble watchers to find out their definition of a sellers versus a buyers market.

Generally, here are the characteristics of a sellers’ market:

>Booming local economy. Local businesses are hiring at a brisk pace. New companies are opening up shop.

>Low existing housing inventory. More jobs are coming into a market where there’s not enough inventory to house all the workers, thus creating financial pressure on local resale units.

>Builders are not producing enough homes to fill the job base. In the Washington, D.C. market, for instance, the local economy is pumping out more than 80,000 jobs in 2005, yet only about 35,000 houses are coming on line during the same period of time.

>Home sales prices are escalating. Over the last several years, the national increase has been in the five to seven percent range. In a seller’s market, it’s not unusual to experience double digit increases. Some communities could double in price in just a year or two.

>Buyer contracts begin to come in non-contingent. Buyers want to purchase a house, period. They no longer offer under list price, ask to sell their house first before settlement, or try to buy without financing already approved. There is no negotiating for the “perfect” terms. Getting the house, is the perfect term.

>Seller subsidies disappear. While buyers used to ask for some sort of assistance — lower price, points paid, closing costs — the buyers must come to the table without any help from the seller.

>High down payments become the norm. Buyers benefit from high appreciation and begin bringing down payments such as 25-plus percent to the transaction.

>Appraisals are no longer needed to qualify for the purchase price. With down payments of $100,000-plus, there’s plenty of equity coming to the table to ease the risk factor for most lenders so that the appraised value is not as important as the actual purchasing price. If the appraisal comes in $20,000 less than asking price — that’s okay, because the buyer has enough cash to compensate for the lower value.

(Full Story)

Related posts:

1. Sellers Letters To Buyers, Why We Loved This Home
2. How to Sell in a Down Market
3. Stubborn Sellers Make Great Headlines But Not Reality
4. A Sign of Sanity: San Jose Housing Market Slowing Down
5. Greenspan is not worried about the Real Estate market