U.S. Economy: Home Sales Drop to Lowest in More Than Two Years

[Sam]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTJAuLwXxcpw&refer=home

Purchases fell in all regions of the country. They dropped 5.4 percent in the Northeast, 5.9 percent in the Midwest, 1.2 percent in the South and 6.4 percent in the West.

``We're more likely nationally to see a soft landing rather than a bubble bursting,'' said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies in Cambridge, Massachusetts. ``People are finding it more difficult, with higher mortgage rates, to buy a home. Rents are starting to go up again.''

 

[dumpster56]

I feel so lucky to have sold my NJ overpriced home back in april. In fact my realtor friend told me the other day that after my house sold that was it the neighborhood sales just stopped dead! Nothing has sold ! In addition there are 75% More homes on the market and every week two more show up for sale all now with prices UNDER the 490,000 mark for the exact same house that mine sold for 513,000.

 

[janeofalltrades]

We bought our condo (California) new in 2002, sold it in 2005. At the time we bought it the builder was pricing each floor $50k more as you went up the stack.  In Feb of this year a neighbor that lived 2 floors above us and had bought shortly after we did sold her condo for $17k less then we had sold ours. Identical floorplane and upgrades, however she originally paid 100k more for hers.

I realize our selling price was over inflated when we sold. And our neighbor sold her condo for more then she bought it for, but thats a 117k drop in the selling price within 10 months.

 

[73ss454]

We listed our house in NY in April of this year. We had 3 different agents in and they gave us selling prices of 679K to 699K. Similar homes sold last year for about 670K or so.

To make a long story short we accepted a 570K offer this month. A house is worth what someone is willing to pay for it at a given time. Sort of like stock market timing. Sometimes you win and sometimes you lose. It's just time for us to move on.

 

[tryan]

Rents are starting to go up again.

This is true ... just increased the rents 5% on 2 units and no a peep from the tenants.

Not all bad!

 

[Andre1969]

Just for kicks I looked up my old zipcode of 21114. I sold my condo back in November 2004 for $185,000, when prices were still on the upswing. They peaked out at around $240-250K the following summer. I found a unit similar to mine on the market for $245K. If anyone's interested to see it, it's MLS #AA6077847. I don't think you can paste a property link directly from realtor.com.

So it looks like they've stalled, but haven't started to fall. Yet. However, I noticed there were like 225 properties for sale in that zipcode. Back when I sold, realtor.com usually pulled up around 90-100. So inventory is definitely up. And I doubt they're getting multiple offers and bidding wars within a couple days of listing, like what happened back when I sold!

When things do soften, I wonder how hard my old neighborhood is going to fall? The condos were built in 1973, and not very well. We were starting to have sewer backup problems from tree roots, and the windows in many units were in desperate need of replacement. The association always had problems budgeting. And for awhile we were in danger of losing our master insurance policy on the community. When I left, my condo fee was about $240 per month. I wonder what it's up to these days?

 

[kcowan]

What bothers me is the claimed 1.2 million jobs in RE that the boom generated. Realtors claim they are moving to commercial construction. But I don't beleive it! Watch for an acceleration of the downshift in the economy once the ripple effect happens.

 

[dumpster56]

Just for kicks I looked up my old zipcode of 21114. I sold my condo back in November 2004 for $185,000, when prices were still on the upswing. They peaked out at around $240-250K the following summer. I found a unit similar to mine on the market for $245K. If anyone's interested to see it, it's MLS #AA6077847. I don't think you can paste a property link directly from realtor.com.

So it looks like they've stalled, but haven't started to fall. Yet. However, I noticed there were like 225 properties for sale in that zipcode. Back when I sold, realtor.com usually pulled up around 90-100. So inventory is definitely up. And I doubt they're getting multiple offers and bidding wars within a couple days of listing, like what happened back when I sold!

When things do soften, I wonder how hard my old neighborhood is going to fall? The condos were built in 1973, and not very well. We were starting to have sewer backup problems from tree roots, and the windows in many units were in desperate need of replacement. The association always had problems budgeting. And for awhile we were in danger of losing our master insurance policy on the community. When I left, my condo fee was about $240 per month. I wonder what it's up to these days?

Its there look up the mls #. Looks like they are kicking in 10K toward closing costs.

The market is getting soft awfully fast. Prices will hold until people decide I GOTTA MOVE cause I need a job! Then when the first few slash prices watch out. seriously, when I was selling I knew I could ask 100,000 less and still make a large profit, I was the original owner, BUT so many bought at 150 to 200 thousand higher on resales that thiose people are well in trouble if they have to move.

 

[dumpster56]

What bothers me is the claimed 1.2 million jobs in RE that the boom generated. Realtors claim they are moving to commercial construction. But I don't beleive it! Watch for an acceleration of the downshift in the economy once the ripple effect happens.

I believe that there are an awful lot of BAD realtors out there. It was like the Honda saleman ! THEY SOLD THEMSELVES!

Houses did for a few years, not anymore. You better have a realtor that has been in the business for a good while!

 

[Andre1969]

Looks like they are kicking in 10K toward closing costs

That's a far cry from when I sold my place. The only way they asked for closing help back then was to offset it by offering to pay more, effectively rolling the closing costs into the loan.

 

[Enuff2Eat]

HEY HEY HEY HEY.... stop all of this non-sense talking. You guys scare my wife... we got all of our eggs in ONE basket. Yes it is real estate. it's the only thing keep our marriage going.

SO please stop scaring my children and my wife. We are banking on real estate for our children's future education. I don't want them to stay at my house forever.


what you guys are saying is that 'there is NO bubble, like the stock drop in 2000 but what we got here is a 'slow and small leaks of the overpriced real estate market, right?? OK thank god, i get to continue to sleep with my wife for a while. The last time the stock market crashed i slept on the couch for almost two years.

thanks all

enuff

 

[Arif]

The last time the stock market crashed i slept on the couch for almost two years.

Need more pillows (for you and the soft landing)?

BTW- I'm heavy invested in RE and starting to turn bearish on areas that didn't even benefit from the bubble pricing. Sticking to rentals for now and limiting rehab projects.

 

[bpp]

Purchases fell in all regions of the country.

Gee, I thought all real estate was local.

But, interest rates aren't... Oops.

 

[al_bundy]

don't even think it's the rates

wife and i make $120,000 per year. did the math and we can't afford a $350,000 home in the NYC area with a $100,000 down payment and a toddler

$1500 mortgage payment
$500 taxes
$500 insurance and utilities
$600 car payment
$300 train ticket
student loans

add in child care expenses, food and other things and that is pretty much all the income we have and nothing into a rainy day fund. told her if she wants a house then we'll wait till the child in planning is going to start school and then buy. property taxes also include free baby sitting service, aka after school activities and bus

 

[Delawaredave]

wife and i make $120,000 per year. did the math and we can't afford a $350,000 home in the NYC area with a $100,000 down payment and a toddler

This has to be a very common predicament.   I don't know NYC area - but $350 has to be a modest house at current levels.   For the "numbers not to work" with a great total income and solid down payment -- has to mean that here's going to be a "decade of readjustment".

Just so "boggling" to me. 

 

[lets-retire]

We recently sold my house for about 100,00 more than we paid three years ago. I went to Realtor and noticed many of the houses that were on the market whe we sold are still there. Some have dropped their prices others are just languishing. It seems we sold ours just in time.

I remember the end of 2005 there were fewer homes listed for sale total, than there are now in my old house's price range. I'm glad I got out when I did. The prices went up almost as much in the last three year as I was hoping to sell for when I retired 15 years from now.

 

[Nords]

told her if she wants a house then we'll wait till the child in planning is going to start school and then buy.

The authors of "The Two-Income Trap" say this is exactly what drives housing prices-- parents looking for good schools & good neighborhoods.

Lending is looser and more spouses are working, so couples essentially can tap more funds (affording them is another issue!) and are able to bid up the prices. But as the U.S. birthrate continues to decline, who knows?

 

[Zoocat]

Everyone seems to have a story about a house for sale that won't move. My ex  has our old house in Ohio on the market where it's been sitting for four months with two price reductions, from $310K to $295K to 284K. And this is a house in a formerly hot neighborhood with excellent schools that has had significant improvements and upgrades in the last two years.

My sister's place in MD has also been sitting with no offers for four months, a house that has been upgraded beautifully, with a deal for closing costs attached. They have also reduced the price.

What is going on?? The cause has to be more than interest rates going up to 6.5%. That's not a high interest rate!  I think this is a case of self-fulfilled predictions. There has been so much hype about the housing bubble for the past 2-3 years that now that interest rates have increased a little, buyers are waiting for the big drop. I think they are going to have to wait a long while. Sellers are not going to give up their appreciation and go upside down on the sale if they can at all avoid it.

 

[brewer12345]

The authors of "The Two-Income Trap" say this is exactly what drives housing prices-- parents looking for good schools & good neighborhoods. 

Lending is looser and more spouses are working, so couples essentially can tap more funds (affording them is another issue!) and are able to bid up the prices.  But as the U.S. birthrate continues to decline, who knows?

I never really understood that. Yeah, its nice to be in a place with good schools, but there are also excellent private and parochial schools in many places. We consciously made a decision to skip the hugely inflated prices that went with the nearby towns with famed school systems because the trade off between higher housing prices (and taxes) versus parochial school tuition was a no-brainer.

 

[Sam]

What is going on??  The cause has to be more than interest rates going up to 6.5%. That's not a high interest rate!  I think this is a case of self-fulfilled predictions. There has been so much hype about the housing bubble for the past 2-3 years that now that interest rates have increased a little, buyers are waiting for the big drop. I think they are going to have to wait a long while. Sellers are not going to give up their appreciation and go upside down on the sale if they can at all avoid it.

At 6.5%, it's very reasonable.  But it's a 30% increase from 2 years ago.  The rate increase is the last straw that breaks the camel's back.

In my view, the housing bubble was never a hype.  I have been convinced of the bubble in the Northeast, the West, and in Florida for 3 or 4 years.  I believe that the cost of a house should never exceed 3 times the gross annual family income.   That 3x ratio has been impossible in the recent past.

 

[Andre1969]

I don't think it's the fixed-rate mortgage that's killing people. It's all those people that bit off more house than they could chew, financing 100% of the purchase price plus closing costs into an adjustable rate loan that was deceptively low to begin with. And even though fixed-rate mortgages aren't THAT bad, every time they go up they still price the house just that much further out of some people's range.

In my case, I have an HELOC, not a mortgage. It's tied to the prime rate. When I took it out back in early 2005 it was at 5.5%. As of the last payment it was up to 8.25%. That's a pretty sharp rise, but I only owe about $76K on it. So I'm feeling a hit of about $176 per month, which I hardly feel. I've just been paying it down more quickly. A lot of people can't do that, though.

 

[brewer12345]

I don't think it's the fixed-rate mortgage that's killing people.  It's all those people that bit off more house than they could chew, financing 100% of the purchase price plus closing costs into an adjustable rate loan that was deceptively low to begin with.  And even though fixed-rate mortgages aren't THAT bad, every time they go up they still price the house just that much further out of some people's range.

Things will get even more interesting when the various flavors of Option ARMs start getting to the end of their "fixed payment" period and start re-casting. Then borrowers can go from paying 1% of the balance annually (and tacking the rest of the interest on to the balance) to paying full P&I every month with a typical rate of 7+%...

 

[Zoocat]

There

At 6.5%, it's very reasonable.  But it's a 30% increase from 2 years ago.  The rate increase is the last straw that breaks the camel's back.

In my view, the housing bubble was never a hype.  I have been convinced of the bubble in the Northeast, the West, and in Florida for 3 or 4 years.  I believe that the cost of a house should never exceed 3 times the gross annual family income.   That 3x ratio has been impossible in the recent past.

I agree that the rate increase was the last straw and that adjustables are a factor.  I am just baffled by homebuyers who didn't consider the risk of the adjustable and budget accordingly    But the "bubble" in the West, Florida, East cities has, I think, only been created because of the demand in those desireable areas. Of course, the low interest rates and easy mortgage terms allowed many people to buy who couldn't have bought in those areas previously.  But a desireable geographic location will remain in demand, even if a "bubble" bursts.  And people will still want to buy houses there and will stretch their budgets to afford it. The 3X gross income rule is really irrelevant to supply-demand, IMHO.

 

[Sam]

But a desireable geographic location will remain in demand, even if a "bubble" bursts.  And people will still want to buy houses there and will stretch their budgets to afford it. The 3X gross income rule is really irrelevant to supply-demand, IMHO.

You're not the only one who thinks the 3x rule is irrelevant.  For me, I just cannot come up with a budget to support buying a home that costs 3x income.

But I hope you're right.  I have a friends and family in those "desireable geographic" locations, and I don't want them to get hurt.  Their opinions is pretty much the same as yours.

 

[Nords]

I never really understood that. Yeah, its nice to be in a place with good schools, but there are also excellent private and parochial schools in many places. We consciously made a decision to skip the hugely inflated prices that went with the nearby towns with famed school systems because the trade off between higher housing prices (and taxes) versus parochial school tuition was a no-brainer.

There we go again, applying logic to the emotional purchase decisions.

Realtors must hate that.