Every year at about this time, we see the “Spring Buying Season” open for business. We typically mean that sellers busily get their homes ready to be sold, buyers clean up their financials and contact their loan brokers, and everyone begins scurrying around town checking out homes and schools and making offers. The goal — move before the end of summer, be settled in for kids to start at new schools in the fall.

So what’s different this year? Families who need to move are still trying to be settled before school starts in September. However, if families do not

need

to move, they aren’t moving. More and more people are staying put if they can.

How about the ones who are moving? Are they renting or buying? We see more people renting if they are coming out of a foreclosure or short sale. It’s not impossible to buy a home if you’ve been foreclosed upon or completed a short sale, but it is more challenging. Moreover, families are feeling burned by the experience of having their home’s value drop in the last couple of years, and many are shy about buying again.

So who is buying? Investors are always looking, but we are more interested in the families who buy. A lot of the families buying homes are those who felt priced out of the market before, and now they see an opportunity to purchase a home in which to raise their children. These are folks who intend to stay in their new homes for a number of years. Others are families who see a chance now to start small, in a starter home, and move up in a few years when the values rise. This is a very reasonable expectation these days. No one is too sure how the values will fare over the next couple of years, but it is not unreasable to think they will rise above current values within five years. So buying now is a very smart decision.

And who is selling? It will come as no surprise that homeowners who now owe more than their home is worth are selling in short sales. Short sales now comprise a hefty portion of the available inventory. Some of these homeowners have genuinely fallen on hard times and are unable to make their mortgage payments; others have made the financial decision to stop paying their mortgage (known as a strategic default) because it no longer makes sense to pay on a significantly underwater mortgage.

Other sellers are those who were going to sell now regardless of what has happened in the market — traditional sellers who are not short selling. A lot of the traditional sales are couples who planned to retire this year and move to another community or a smaller home. Their home’s equity has fallen in the last couple of years, but they have small (or no) mortgage balance and life goals trump the financial aspects of their home. Yes, they will realize a smaller profit than they would have had they sold a few years ago, but they still want to be in Arizona or near their grandchildren or in a smaller home. Traditional sellers are at a great advantage in the marketplace right now, as buyers who enter into a contract with a traditional seller can be reasonably assured that their transaction will close, and close on time.

The other sellers are the banks selling their foreclosed inventory. This component of the market has been dwindling in recent months as banks heistate to flood the market with distressed inventory for fear of depressing prices even further. We expect to see this change in the coming months, as banks cannot sit on unsold inventory without running afoul of their shareholders’ expectations, and not foreclosing on delinquent mortgages is similarly irresponsible from a financial perspective.

The feeding frenzy that is the typical Spring Buying Season is definitely turned on its head this year, but there is no doubt that the market activity will still take place. It will be very interesting to see how all of the competing needs and expectations of the market’s players come together.