Sluggish Housing Market Gives Auctions a New Identity
- Dec 19, 2007
Yesterday’s news contained an item about a Chicago-area company that had just completed the first phase of its housing auction series. The properties up for bid included single-family homes, unused land, apartments–more types of housing than you might expect.
Although the word "auction" may conjure up images of a 4-H club–or bankruptcy, some of today’s housing auctions involve neither.
Of course, RealtyTrac announced today that U.S. home foreclosures had risen 68 percent in November from a year earlier, according to Bloomberg; and so there clearly are bankruptcy-related auctions. (So many, in fact, that one company has launched an auction Web site to handle the sale of pre-foreclosure, post-foreclosure and bank-owned properties.)
But auctions also can be a way to unload extra condo units in a mostly-sold building, unused land and other items that aren’t wrapped up in financial turmoil.
Developers around the country have used auctions recently to unload property for a variety of reasons.
- Buena Vista Custom Homes sold 141 homes–generating a total of $65 million–in an auction held last weekend at the Oregon Convention Center. Roughly 2,209 attendees came to bid on the 240 homes, according to the Oregonian.
Buena Vista set reserve prices to mirror cost; the company says 96 percent of the homes sold were sold under the reserve price–as low as $195,000 for a 3 bedroom 2 1/2 bath home in Sandy, Oregon to $510,000 for a 5,073 square foot 4 bedroom 3 bath home in Happy Valley, Oregon.
Homes offered at auction ranged from 1,113 to 5,073 square feet and were located in some of the areas of highest demand around the Portland metropolitan area.
Buena Vista also is donating a portion of each home sold–more than $250,000–to 19 area charities.
- Before last year, most homes that had been seized due to mortgage defaults in the Mesa, Ariz.-area were sold at trustee auctions at the Maricopa County courthouse, the Arizona Republic reports. But now, because the value of many of those properties has dropped–and yet a significant amount is still owed on them–buyer interest has waned.
The solution: Auction firm Hudson & Marshall recently held an auction in Mesa which the Republic is calling the potential start of a new trend. Homes in the auction, which had been repossessed by large U.S. lenders, ranged in value from $100,000 to $600,000. And yet, more than 75 percent of the properties sold for prices from $75,000 to $465,000.
The home buyers got a deal–but in truth, the large banks who would probably rather recoup some costs by unloading foreclosed homes–rather than paying for and dealing with their upkeep–did, too.
And yet, in some very depressed home markets, buyer interest–no matter how great the deal–may just be too low to support an auction system.
In California–which saw some of the biggest home value jumps before the bust and some of the biggest falls after–just 17 of the 1,336 homes in foreclosure offered up for auction in Modesto, Merced and Stockton last month actually sold, according to the San Jose Mercury News.
To buy a new home, unless you’re a first-time homebuyer, you have to maintain some belief that you can sell your current residence.
And in places like West Virginia–in which some areas are seeing homes sit on the market almost two months more than last year, according to the Times West Virginian–and California, that’s an iffy prospect these days. Home shopping may not seem like a good idea, no matter how big the deals are.
But, for developers with unsold portions or deals that fell through as financing got harder to come by, auctions can be a way to bid yourself back to being in the black.