Florida homebuyers face bidding wars while lenders hold back foreclosures to increase competition

Florida real estate investors and first time homebuyers, seeking to make profit or capitalize on the $8,000 tax credit, are facing competition for homes priced under $200,000. It is not uncommon, in fact it is becoming the norm, for homes in this price range to become the object of a bidding war and, in some instances, to sell for more than the asking price.

Despite the encouraging signs of this apparent turnaround- prices leveling off, inventory being reduced, market researches warn that the foreclosure crisis is far from over. For one thing, it will take more than investors and first time homebuyers to bring the market back from its current sluggishness. Another concern is that Florida unemployment keeps rising, which means that more homeowners will likely face foreclosure.

But more disturbing is the suspected practice of lenders in creating an artificial price increase. Some observers suspect that lenders are holding back the supply of foreclosed homes, promoting bidding wars to increase prices now before the flood of new listings further depresses prices. Banks dispute that notion. They say they're overwhelmed with foreclosures and try to market them for sale as quickly as possible. Holding onto foreclosed properties, the banks argue, only costs the bank more money. One can't help but wonder: if the banks realize that foreclosure is not in their best interest, then why are the banks fighting alternatives to foreclosure?