Housing Auction Reveals Pockets of Weakness

In a two-part series of articles, the San Jose Mercury News puts on display the sheer impact the downturn in the housing market has had on some greater Bay Area neighborhoods.

The first article discussed the jitters homebuyers have after Anderson Homes, the builder of their neighborhood has decided to auction of the remaining homes in the subdivision.

The second article covers the post-auction feelings of one of the homebuyers.

In subdivisions in Los Banos and Manteca, some buyers have seen price differentials north of $150-200K between prices they paid earlier this year and what homes sold for at auction. These communities provide larger, more affordable housing, but the long commutes and otherwise less attractive demographics make them particularly vulnerable to a downturn in the housing market.

Housing auctions are interestingly enough beginning to resemble the dot-com asset auctions Silicon Valley witnessed earlier in the decade. As an investor in dot-com assets, I found the best deals during the initial stages of the auction wave as many people remained uninformed and skeptical. When word of profits leaked into the market for investors who got in early, eventually popularity of the auctions and interest grew and prices of those assets increased and inventory decreased. Without any further significant deterioration in finance and the overall economy, investors might uncover a similar scenario beginning to form in the housing market.

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