Prior to the real estate boom and bust, keeping up with the Joneses was a national pastime. However, thanks to the current economy, paying retail is a fool's errand, especially when the national landscape is splatter with bargains in the form of highly discount properties. A recent report released by the San Francisco-based real estate research firm Trulia.com, has shown that one in every four U.S. home sellers slashed the asking prices on their houses.
According to a story on the Huffington Post, "The price of homes in America's 50 largest cities was reduced by an average of 10 percent last month, totaling a dollar amount of $30.1 billion." The trend is affecting properties at every value from starter homes to luxury mansions, and there are a multitude of reasons why.
What's Fueling Home Price Discounts?
The nation is experiencing financial woes unlike any in our recent history. It is the perfect storm of the mortgage meltdown and astronomically high unemployment rates that have kicked off the home discounting trend. Some specific reasons contributing to the trend include:
- Expiration of the First Time Homebuyer's Credit: One way the Obama administration has tried to stimulate the economy was by offering first time home buyers thousands of dollars back just for buying a home for the first time. The credit has now officially expired, and homeowners are now in the position of providing additional incentive to a highly competitive buyers market.
- Changes in the Mortgage Industry: As a result of the economic troubles of the nation, private mortgage lenders have stricter guidelines regarding the mortgage application and approval process. Not only do home loan applicants need to have excellent credit ratings well about the 680 FICO mark, proof of income verification is being heavily investigated. Less people are qualifying for mortgages limiting the number of potential buyers.
- Competition: It has been estimated that by years end, more than 1 million additional homes will become foreclosed. When that happens, the mortgage lender will then become a property owner, and that is the last thing they want to do. Instead, they will price the properties at the lowest price possible, in order to speed up the transaction and hedge out the local competition.
- Employment Uncertainty: For those concerned about what their employment future holds, the last thing in mind would be committing to an expensive investment like a house.
What are the Best Types of Discounted Properties to Buy?
- Uncle Sam: Currently the government is the largest land baron in the nation and consumers can browse options from Fannie Mae to the FDIC.
- Bank Owned Properties (REO): According to real estate site Zillow.com, REO homes are typically priced 20 to 30 below market value as compared to traditional home sales. Although most bank owned properties come in "as in" condition, the substantial savings and totally clean tax records make them a practical approach to discount house shopping.
- Direct from Owner: Current homeowners looking to unload their properties are at the mercy of free market competition. Home sellers know what they are up against are competing as best as they can in the market.