It’s hard to buy a new home if there are none to be had, and real estate recovery is a product of many sales over time. If you have taken a look to see what’s available in Benicia and the surrounding area over the past year, you will know that there is very small inventory to sample, and a very quick rotation, as homes are listed and sold as quickly as the banking process will allow.

Home prices rose in Benicia last year, but due to tightened appraisal parameters they did not go up as fast or as high as the buyer demand clearly indicated. Most homes listed in the area received multiple offers. However, even if a seller accepted an offer well over listing price they would later encounter difficulty closing at that price, due to the available comps showing a similar unit selling just a few months before for less money. Lenders will generally only loan based on the appraised value, leaving the buyer to come up with the difference in cash, or the seller to drop the price to the appraised value.  Cash deals help, as they are not generally contingent on an appraisal and are more representative of pure market zeal.

As always, cash is king, and many a buyer has been frustrated over the past year by cash buyers swooping in on homes with the seller giving little consideration to the buyer with financing.  The continued lack of inventory will certainly exacerbate this situation. The question is, when and how much inventory will the banks release for sale? We know there are foreclosures out there that have not hit the market; and there are likely new foreclosures on the horizon as some loan modifications have been less than helpful for those trying to make the payments on a home that is so upside down that it will never pan out to be a sound investment.

The real question is WHEN the banks will start releasing more inventory. We know that once they foreclose they have to take the hit on their bottom line and show the loss on their earnings statement.  We also know that when they flooded the market a few years ago it had a very negative effect on housing prices.  With all the uncertainty of the Fiscal Cliff and many macro economic forces at play, it is hard to pinpoint the exact reason for the delay. There is, however, a sweet balance that we are hoping to find over the next 12 to 18 months.

On the flip side, with home prices rebounding a bit, we are finding that homeowners who are on the brink of break-even are holding out until they can, at the very minimum, cover the costs of sale. As we see a modest recovery of 3% or 4% over the next year, many homeowners who have felt like they were held hostage by the housing crash, will have the freedom to sell or, dare I say it, enjoy a bit of equity again.

Having a trained, full time realtor representing you as either a buyer or a seller is key. They will know when new listings will be hitting the market, and they will help you fashion the best possible offer given your individual circumstances. Sellers will be in the drivers seat with multiple offers. Remember that just because the buyer is willing to offer the moon on price, their lender may not be willing to deliver.