Reader comments
It's a (auction) block party

See folks, they didn't get the houses for below market value. The price they paid IS MARKET VALUE. It will be a rude awakening for so many people who think their house is "WORTH" such and such amount. So many people are going to be underwater that it isn't even funny. Now you know why this "downturn" is not going to recover for several years and is going to get a lot worse before it gets better.

Housing construction costs are up because of oil prices. If you buy a house for below what it costs to build plus a below average lot price, you bought your house at below the current market value. It also depends on how inflated the lot prices are to begin with. If a person bought a $700,000 house for $250,000, yet the house cost $500,000 to build at current construction rates, that is a lot of wiggle room. You could give the lot away for free, but the house still has tremendous value. If you are desperate to sell your home, you may have to do so for below market value, but those who aren't planning on moving shouldn't worry about market value right now anyway. I agree that the downturn will get worse and house values (mostly taken out of lot prices) will not recover for some time.

Those who bought at the first auction will soon realize that prices at the second auction are better and the third auction even better than that. Too many negative factors working against a home price today.

A good house in a good neighborhood will always be valuable. Price is relative. Old neighborhoods don't need to be rundown. Turn your tv's off and make your neighborhood sweet!!! It is ok to care about your yard. Don't be a hillbilly!!! Throw all the junk you are not using out. Really. Get to work. Even if you are low on cash you don't need to be a briar. Let's keep Utah looking great. Thanks.

It will be interesting to see if the bank actually accepts those offers. People may get a great deal at the auction, but the bank can still reject their offer. Only in an auction that is absolute does the bidder walk away from the auction knowing they got the property. I believe in this case the bank has 7 days to accept or reject the offer. Those who think they can get a house anywhere near the minimum bid need a reality check. Regardless, it is still a great way to get a great deal on a house!

The bottom line is that most people in Utah cannot afford or qualify for a home loan for the dollar range of these more expensive homes. We just don't have the wages to support buying homes in these price ranges. Therefore prices must drop in order for those homes to sell in Utah. Rising prices in energy, and food will also strain the ability of people to afford larger loans. It has taken a little longer here in Utah for the realities of subprime mortgages to hit this state than it did for the rest of the nation but Utah is not immune.

Why, in heaven's name anyway, would a person NEED a $600 thousand dollar home?

Want, maybe, but not need...

No wonder we're all in such financial trouble.

Don�t be silly. If a house is worth $600,000 then it will sell for $600,000. They are only worth what a ready, willing, and able person is willing to pay. That could be $10 and a bag of red licorice. We live in a Market Driven Economy controlled by market forces rather than by the arbitrary estimate of value by your friendly loan officer trying to get out of a bad loan.

Don�t be silly. If a house is worth $600,000 then it will sell for $600,000. They are only worth what a ready, willing, and able person is willing to pay. That could be $10 and a bag of red licorice. We live in a Market Driven Economy controlled by market forces rather than by the arbitrary estimate of value by your friendly loan officer trying to get out of a bad loan.

We keep hearing the argument that construction costs determine the price of new and used houses.

Balderdash! The market value is WHAT PEOPLE CAN PAY AND ARE WILLING TO PAY.

No, you may have bought the house for less than what it cost to build, but you did not buy "below market value". Market value is just that--what value the market (the consumer) places on the home. That is reflected in the actual price paid for the home. Would you ever sell your home for less than what the market will pay you? Not if you are in your right mind.

If homes will only sell for less than they cost to build, then, builders will simply stop building homes for a while. Which, is exactly what needs to happen for at least a couple years, given the glut of vacant homes that keeps increasing with foreclosures.

As homes drop, the costs to build will come down anyway. Land will cost less, materials will cost less, contractors will agree to work for less. Those builders stuck with homes based on 2006 costs will have to take losses or go bankrupt to get out.

Valuing a house (or anything) based on what it cost to produce is known as the "labor theory of value". That theory was highlighted in an economic and political system that crashed and burned pretty badly last century, if I remember correctly.

If the last three arguments were true no one would ever make money on real estate in a faltering housing market, yet thousands are doing just that. I bought a house in Dec. 2007 at auction for 298,700 and sold it for 425,000 in Apr. 2008. Cash buyers have the opportunity to pick up on bargains that are typically not available to the general public. The truth is the "market value" is a general term used to describe what a home is worth generally to a wide swath of buyers, but when it comes to individuals, there is a much wider range of perceived values.

"regular dude",

The answer is that you made out like a bandit, your buyer overpaid, and is likely regretting the purchase or soon will.

Regular dude, go to any real estate seminars lately? One of the things that drove the crazy market (besides crazy loans) was the get rich flippers. I have several neighbors that got wiped out by the stuff you are selling.

These arguements are good, but no one seems to see the "whole picture." Cost of houses is affected by land, cost of materials, and cash "now." If someone has cash now, then of course, if you are a seller, you take it. But if you are a seller, and aren't stressed to sell fast, chances are you can get a little more.

Does anyone know where you can find listings of home auctions like those referenced in this article? I can't seem to find them online (other than all those pay sites). Fun to see what is avaliable!