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what some believe is happening is

(a) investors bought a large % of the foreclosed homes and homes that might have been foreclosed on if the owners did not sell, and

(b) they held onto a large % of those homes they bought,

(c) and after fixing/cleaning them up, or not, they have rented, not sold, many of them, which has kept a lot of them off the market for regular primary residence home buyers, and

(d) even in a down market, when there are still some buyers but fewer than before, low supply of “for sale” homes, even an artificially created low supply, can mean some buyers will pay a premium to buy a home.

In one case I know the details of, in a San Bernardino County suburb, a 1955-built 3-bedroom 1400sf 2car detached garage house (a) had an outrageous [I know the exact area very well] market value of $378,000 at the top of its price bubble in 2006; (b) foreclosed to the lender at $274,000 in May 2011, (c) sold for $95,0000 in Feb 2012 [the owner had been asking $114,900 since Dec 2011 after 4 months of not getting $144,900, (d) sold for $188,000 in July 2012, (d) is valued by zillow for $181,000 today, and (e) is up for sale now for $245,000.

With 12% unemployment in San Bernardino County, I question that the job/employment base there can support that kind of housing price increase, in that market. Yes $245,000 is still below the outrageous market value it had in 2006 and below what it foreclosed at in 2011, but in my view, knowing the area, neither of those values were justified, both were somewhere in the midst of the bubble prices in that area.

I am hearing similar reports of new really wide upswings in home prices from a number of S.California sources. I tell them what I know about the employment data and ask them where are the new jobs. They tell me they don’t know.

It all sounds like investor held inventory has been rented, kept off the market a lot, shrunk the for-sale supply, boosting for-sale prices even in this down market.

But, after their trickle sell-off of their rented inventory, at shrunken for-sale-supply price premiums, the econ growth, job growth and job stability data might not support what these houses are getting now, putting recent buyers underwater in a couple years in some places.

I guess on the theory of sell high and buy low one could only recommend to people in the midst of these local bubbles, if they desire to sell and if they can get a really good profit, go ahead and sell, but buy the replacement home in a different area that is not now seeing these price upswings. If that is not possible due to job & family circumstances (can’t leave the area), I’d be cautious about selling now and buying something else in the same area.