Will Bidding Wars trigger local regulation or global reformation?

Click on icons above for details of homes sold $100,000 or more over asking price from April 1 to May 15, the first six weeks of 2Q2014 in Cambridge, Boston & Somerville.

As Cambridge goes, so goes Lunenburg.​”​​  Really?  When a credible news source like the Boston Globe publishes statements like that, it’s time to ask what role the media has been playing in the return of self-perpetuating bidding wars in Boston and beyond?  Thank God, others — including at least one member of Boston.com team, question whether runaway bidding wars in Cambridge are a harbinger of The Biggest Home Price Boom Ever?

Think Cambridge is immune from housing downturn?  These flashbacks might cause you to question your assumptions:

Part I: Housing slump hits Cambridge: 1 in 3 single family homes selling below assessed value
Part II: Million Dollar Markdowns coming to a neighborhood near you?

While we’re asking questions, here are some others to consider — and maybe rank in order of importance:

1.  In an age of transparency, why are home buyers forced to use a blind bidding process that manipulates them into overpaying?
2.  If you are a homebuyer, how do I know if you’re bidding against myself?
3.  What role are conflicts of interest playing bidding wars?
4. What role are automatic escalator clauses playing?
5. What happens when bidding wars castrate mortgage contingencies, and take the brakes off mortgage market?
6.  What are the risk and potential costs to taxpayers who are now guaranteeing 90% of mortgages up from one in three in 2006?
7.  What are the social costs of moving rungs of the housing ladder further and further out of reach of first-time homebuyers and others?
8.  After the last boom / bust, what did the real estate industry and industry regulators learn about containing speculative cycles?
9.  How are other cities around the world responding to bidding wars & real estate speculation?
10.  Bottom line:  Is it time to pass an Emergency Bidding War Transparency Act?
Regulatory response

Those are some of the questions the Real Estate Cafe has blogged about and discussed privately with elected officials and the Cambridge Consumer Council since January.  More recently, we’re pleased by the interest of investigative reporters and dream of using http://CrowdSwell.com to raise awareness and funds to mount a Bidding War Backlash, potentially in several cities in the US and even around the world.

What’s the case for a regulatory response, and what might that include?  Let’s begin that conversation where the New Yorker ended an article called:  Real Estate Goes Global

“The challenge for Vancouver and cities like it is that foreign investment isn’t an unalloyed good. It’s great for existing homeowners, who see the value of their homes rise, and for the city’s tax revenues. But it also makes owning a home IMPOSSIBLE (emphasis added) for much of the city’s population. And the tendency of foreign buyers not to inhabit investment properties raises the spectre of what Yan has called “zombie neighborhoods.”

One option would be to severely restrict foreign ownership, but that’s politically difficult, and not great for a city’s economy….”

Restricting foreign ownership would require verifying identity, which is the first step to regulating BLIND bidding wars as we wrote three years ago, before bidding wars reached EMERGENCY levels.  What else should be included in the proposed Emergency Bidding War Transparency Act?

Victims or fools, time for Emergency Bidding War Transparency Act
http://bit.ly/FoolishBids  Please share this URL via social networks

How does the emergence of two housing markets in America shape your response, particularly given this stunning quote:  Incomes for recent college graduates are down sharply from 2006. And the median net worth for graduates under 40 is a paltry $8,700.

NEXT STEPS:  Want to be part of our Bidding War Lab?

Homebuyers, innovators, policy makers, and elected officials:  Please let Real Estate Cafe know if you’d like to collaborate on decision-making tools like the map above, showing bidding war data for the first six weeks of 2Q2014 in Boston, Cambridge and Somerville. The interactive map was created from MLSPin data during the #DigitalFluency workshop hosted recently at the MIT Media Lab. Special thanks to writer and editor Kristie Reilly for her creative insights into the analysis and data visualization. We’re both pleased that the findings generated a strong response from other participants, see http://bit.ly/RELunacy.

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Posted in Affordable housing, Bidding wars, Bubble Hour, Crowdfunding, Defensive Homebuying, Dual Agency Detective, Housing bubble, Investigative Reporting, Real Estate Bubble, Real Estate Consumer Bill of Rights, RECALL: Real Estate Consumer Alliance

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