Builders in the Seattle area continue to turn to auctions as a way to sell new homes that they have been unable to sell for their original asking prices.
The following stories also provide hope to those who had been previously locked out of the housing market by high prices. Furthermore, they are a cautionary tale for buyers who are tempted to be the first buyers in any new housing complex. A few months after you pay full price, the builder may be offering neighboring homes for less than half of what you paid.
From King5 News:
Home builders desperate to sell are turning to auctions to get rid of their property, and the prices for brand new homes may shock you.
Nearly 100 newly built homes and condos from Fife to Everett will be auctioned off Sunday in downtown Seattle.
Leah Wagner and her family hope to have one of those winning bids.
“It’s going to be our first home,” she said. “It’s an opportunity we haven’t had because the housing market was so high previously.”
It’s a new trend occurring in Western Washington.
Real Estate Disposition Corporation is holding the auction. The soft economy combined with the glut of new homes have created a perfect opportunity for homebuyers.
Here’s an example of the type of savings: For one house that was listed well over $400,000, the auction bid starts at $159,000
From the Seattle Times (I think this is the same auction as covered above):
This Sunday, a homebuilder plans to auction off 17 Issaquah Highlands condos, at starting bids less than half the list prices of a few months ago.
If you’re lucky — if there isn’t a rapid-fire bidding war — you might pick up a brand-new, carpeted one-bedroom with 9-foot ceilings, patio, parking space and washer/dryer for a price not seen around here in a decade: $95,000.
The Seattle-PI reports on Capitol Hill area condos being auctioned:
Here’s a scene that would have been unheard-of a year ago.
Back then, the condominiums at Press on Capitol Hill were selling in the $300,000s or $400,000s. But for the past couple of weeks, big red “Auction” signs have adorned the building — and bids for some of the condos inside will start at roughly half their original price when they are auctioned off later this month.
As one Press Condominiums resident Brian Gruneir noted Friday, there was an air of desperation a couple of weekends ago, when teenagers stood on nearby corners holding eye-catching red auction signs with arrows pointed toward the Press’ two buildings at Belmont Avenue and Pine Street.
Sam Castic, 26, was part of a steady stream of people coming in to take a look.
“Oh, this is nice,” Castic’s 82-year-old grandmother, Pauline, exclaimed at the kitchen with shiny, new appliances behind a counter overlooking a living room with wall-to-wall carpeting.
Castic walked around the two-bedroom, 940-square-foot condo that Press was selling a year ago for $392,000, but that now will start with a minimum bid of $215,000 at auction.
I expect that these units will all go for more than the opening bids at auction, but at a substantial savings from the original asking price. The important thing is that they will be sold and will quickly be occupied. People who could not afford to buy a home before will now own one. The prices will have been set at auction which is a more true market value than when prices are being manipulated by government policies which can change on a whim.
The government’s current efforts to force mortgage interest rates lower are simply another way to artificially prop up housing prices. When interest rates turn around and start back up, the prices which were artificially propped up by the low rates will have to fall or stagnate to keep the payments affordable.
All these factors suggest that until there is a major improvement in the economy, potential home buyers will continue to get more for their money the longer they wait to buy.
UPDATE: The Seattle Times article about the results of the auction indicates that all the units did not sell. That’s not good news.