Bidding Wars — With very, very few exceptions, we’re only seeing bidding wars for entry-level homes. Transaction volume for homes under $400K (esp for homes under $300K) has been on fire this year — volume two times higher than last year for some months. The drivers: low home prices, low interest rates. When a bank lists a single family home on the market in the $200s or $300s, there’s fierce competition from buyers and investors. For homes $400K to $800K (depending on the area) the market is more balanced. Over $800K and higher, demand starts to fall off the cliff in most areas.

Prices — prices haven’t increased in all price ranges. The tide isn’t rising all boats here. We’re still seeing values go down for the higher end of the market.

Supply — total inventory here has gone down every single month this year – down 30% so far this year. Why? We typically have a big move-up market which adds inventory and drives demand. Now, only the brave and hyper-motivated are moving-up. People are only selling if: 1 – distress/foreclosure, 2 – divorce, 3 – retirement, 4 – relocation, 5 – moveups. Move-ups are typically #1 here. Right now, if you don’t have to sell, you’re staying put. I don’t worry about a “flood” of new foreclosures. Distress inventory here is down 33% this year. Add more REOs – buyers are ready to jump on bargains.

$8K Tax Credit – I don’t believe it’s having a tangible impact here. The $8K credit is a bug on the windshield of the locomotive of low prices + low mortgage rates. Let it expire IMO.

Unemployment – The metro DC area as the lowest unemployment of any large metro area in the U.S. Lots of diversified white color and government jobs. Yes, retail and construction has been hit, but these jobs don’t drive our housing market. We’re fortunate. You can’t sell homes if people don’t have job.

Mortgage Rates. The fed has pulled out the stops to keep interest rates at historic lows to encourage borrowing. They’re pulling a lot of levers that I don’t understand. I do worry about future higher rates once the hangover of deficit spending kicks in. Will this start in 2010? I don’t know. I believe our market is very sensitive to rates, so rising rates would be noticed immediately in lower transaction volume.

The bottom line. You ask ‘what’s the real deal’? Our market — like most markets — is really choppy. To make sense of it, you must understand what’s going on by *location* and *price range*. We have both raging seller’s markets and strong buyer markets, so stay away from generalizations.

I think you hit the nail on the head with the premise of banks not allowing foreclosures to go on the market.

In the most densely populated county in my area – Richmond – there are 478 foreclosures, according to RealtyTrac. Only sixty of these homes are “listed.”

On 31 December of 2008, a full 400 properties expired in our MLS, bringing our inventory down to just over 4,200 listings (all properties). To date, the active properties mark has remained in the low 4,300s (from a high in the low 4,800s in July of ’08).

We are not, however, in your situation. Sellers are not getting multiple offers, appreciation remains flat (small pockets have depreciated), and a home in mint condition still takes over 100 days to sell. Only three months of this year have beaten 2008′s figures, and we remain down 48% on 2006′s totals (the best year ever in this area).

I anticipate rates will creep higher, but foreclosures will only be dripped on to the market for an extended period (three years?).

Navy Chief, Navy Pride